You adjust the points when they are fully open. It fires when they do open and you want the piston around .050 BTDC at this point or also that engine must have taming marks. Not that big of a job to check the key just remove the flywheel. I find then the keyway is striped it doesn't run at all. Just why do you think the key is striped, did you hit something or take it apart and didn't torque the flywheel proper so check it out. Because of the backfiring is the reason I think more of a valve adjustment and also you said the engine has a lot of hours on it.
I will go ahead and check the valves before the flywheel key.