If you're seeing slack in the timing chain, I would really suspect that your timing tensioner has given up.

Admittedly, I haven't worked on the v8 engines much yet, just tearing into one at the moment, but from what I've understood from studying other's comments, the tensioner should maintain some tension even without having pressure.
In my SD, for example, there is a spring inside that keeps it from slapping on starting.

Assuming I read the chain pattern properly, you shouldn't see the slack on the top of the chain when you're pulling the chain around in the proper engine rotation, to check the timing marks. This would be due to the crank pulling everything, the tensioner being on the "outlet" side of the crank sprocket. When it's snug that direction, if you had slack below the right cam, that would seem to point to tensioner, or possibly the rail.


I hope that I'm not barking up a tree here, and that I wrote that somewhat coherently!

__________________
-Josh
Testing the cheap Mercedes axiom, one bolt at a time...