318 Engine stumble

Thanks for the better distributor info; helps a lot. Mmmmm, I'm not at all convinced that the weight and plate motion is the problem. I would not do anything there at this time.

You sound to be on the right track on how to limit the total advance: limit the movement of the center top plate. BTW, that plate moves CW on the shaft as mechanical advance increases. This moves the points on the reluctor CW, and that means they line up with the points on the pickup earlier in the rotation, and that advances the spark.

Please help me understand a few statements better:

If you look at the reluctor wheel. It’s not pointing at the matching spike. It’s offset.
When the reluctor wheel is offset like you show, is this when the rotor is properly pointing at the spark tower?

I have to move the distributor back in timing advance to get it to line up correctly to 0° at TDC......This is making it retarded.
In the first sentence, when you say 'it', do you mean getting the rotor lined up at 0* or the time when the spark fires? The meaning of 'it' is not clear to me.

And to be sure we are talking the right terms, you advance the distributor timing by turning the distributor body CCW. If you move the distributor body CCW to make the points line up (as in your pix), you are advancing the timing.

Here is an article that appears to discuss the exact problem you are having with rotor phasing. The OP's 'customers' changed pickups and suddenly the rotor phasing was off by 22*. Please look at the pix near the bottom of the 1st page to see how different pickups have the wires color coded in reverse. Perhaps you got the wrong pickup? These are pretty cheap distributors made in China so anything goes IMHO....
MSD HEI new module timing off big time? - Speed Talk