Problem with 383 distributor, (earthing issue?)

That looks like a Bosch module, not GM. The pick up wires that would normally be connected to the GM module need to be reversed, ie, the wire that goes to the small terminal on a GM module needs to go to the large terminal, which from memory is the outside terminal on the Bosch.
Having the p/up wires reversed will still generate a spark, but at the wrong time.