I posted this a long time ago but only fixed the problem last month. It turned out the timing chain did skip a tooth somehow. The timing would not set up properly and the distributor needed to be turned all the way for it to be even close.

We replaced the chain with the cover assembly and reset the timing marks. It was off by one tooth. Voila! Now the timing is in the middle of the distributor adjustment and it runs great! Just wanted to get back to you all especially everyone who posted. Thanks for all the great suggestions. <img src="/forums/images/graemlins/smile.gif" alt="" />