Regarding the phasing on the cap. If you have a vac advance and it is not hooked up, that could account for the arcing on the side of the terminals. The vacuum can when applied will sweep the rotor across the terminals lining up the rotor with the cap. Hope that makes sense.
Also when retesting the leak down. Try listening more carefully without background noise. Put your ear to the tailpipe and the carburetor and the crankcase. Check adjacent cylinder spark plug holes and the radiator. If still leaking and no source can be found try tapping the top of the valve to dislodge any carbon or foreign material that may be stuck in the seat. Try the oil in the cylinder last. 70% is a lot of leakage. If it is leaking that bad you should be able to source where it is coming from.