A couple of thoughts I haven't seen yet posted: 1 - check to make sure the aftermarket gauge/sensor are reasonably accurate. Remove the sensor from the engine and place in actively boiling water. Gauge should read 212� (at sea level). You can't necessarily infer too much above and below that temp, but should give a ball-park idea if you're seeing an accurate temperature reading around 212�, which is your concern.
2 - Regarding the timing. This motor likely should be using non-ported (manifold) vacuum as opposed to ported vacuum for the vacuum advance (lots of internet references on this; ask more here if more help needed). The initial timing at idle should be set with the vacuum advance disconnected (vacuum line removed and plugged). 8�BTDC is likely fine. Idle speed (and idle air/fuel mixture) needs to be correct when setting the timing. With the initial timing at idle speed set, reconnect the vacuum advance. If you check the timing at that point, you'll find the timing will have advanced - that is ok and normal (do not reset the initial timing!), and should help the motor to run cooler at idle.
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