I did read all this stuff before posting, from what I've seen you did in #1....The carb. is not the problem. It is just out of time (Crank,Cam,Counter-Balancer,Governor Gear) Tear it all down again in the block....and remove it all and start over. You need to check the flywheel key to make sure it has not sheared by now too.
I wanted to thank you Mr. Cajun for your advice on this one, looks like you could be right on the sheared key, I will get one first thing in the morning and keep you updated, this key was in three pieces when I pulled the fly wheel off. I know when I put it back on it was all clean and correct, but possibly it back fired when I hit the starter or something, I am not really sure.