Make sure the vacuum diaphram is working before you set the timing -- if it is stuck or leaking, the timing will be very late and you will have pitiful performance.
You can also set the timing for 7 BTDC with the vac off if you want, this will be very close to what it would be with the vac applied.
That water pump design isn't the best I've ever seen, although it isn't too strange by 1966 standards....slide rules and hand done ink drawings make things a bit more difficult.
1972 220D ?? miles
1988 300E 200,012
1987 300D Turbo killed 9/25/07, 275,000 miles
1985 Volvo 740 GLE Turobodiesel 218,000
1972 280 SE 4.5 165, 000 - It runs!