Pull out the ECU as incoltnito stated and then revisit the timing.
The timing I assume is a distributor mounted on the back of the head towards the firewall?
It would appear to be the case, so yes the gears have to be inserted and then has to line up with the cap in #1 position, and with pistons 1+4 at TDC (they are a pair on stroke). #1 position is going to be which ever way you can get it to run right, as going off even one tooth may take you almost past where adjustment of the timing will allow you to bring it back
into spec. There are more manuals and possibly pictures located here:
http://www.geocities.com/berserko_1/c50/ Make sure you have the timing plug grounded when setting the timing so as to not allow the ECU to compensate and subsequently keep the timing roughly the same regardless of what you do physically to the distributor base.
That ECU is almost assuredly on the way out, so pictures would be great.
If the ECU is whack, yes that is the technical term(!), send it to Steve Piette (search his name here) great ECU repair guy with fair pricing or source another used one here as they are plentiful at times.
We'll get this figured out with you.