When the points open the light goes out at least if you have the test lamp wired between the dizzy and the coil low tension side to show when the points are conducting. Your post about the Aussie guy is correct regarding the way the points operate, I've used static timing many times for initial set-up on cars.
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If the test lamp is in series between the coil and breaker points it will go out when the points open and interrupt the coil current, which is when the spark jumps.
However I connected the lamp across (in parallel with) the points so the light turns on when they open, and I didn't need to disconnect the coil wire or disturb the points or distributor position by reconnecting it after properly setting them.
The coil is a large inductor which converts the energy of current flowing through it into a magnetic field. When the strength of this field increases or decreases it acts like a generator that opposes the change in current, causing the current to appear to have inertia. Current increases fairly slowly when 12V is applied across the coil by closing the points, and it tries very hard to continue flowing when the points open to break it.
in the old low-tension (low-voltage) ignition system the points were inside the combustion chamber. When the points opened the current would continue between them as a spark, like arc welding, which fired the cylinder.
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've burned through too much of my daily internet ration looking for an image of the early Daimler igniter which IIRC really was pointed, thus the term.
Separating the switching and spark gap functions made both more reliable. The high tension system you have uses a coil with two windings, a transformer.
The low voltage or primary winding is matched to the battery voltage and current, and the high voltage or secondary winding of many more turns of finer wire is optimized to create a high voltage, low current spark across the spark plug. Otherwise it operates like the simpler low tension system whose concept may be easier to understand.
When the points close the current and magnetic field build up during the "dwell" time, which is part of the distributor shaft cam profile. The grease in the ignition kit goes on this cam. When the points open the field tries to keep the current flowing through both windings, and succeeds through the spark plug gap, where the arc current rapidly depletes the magnetic field's stored energy. The condenser (mostly) absorbs the current that would have sparked across and eroded the points.
Then the condenser returns its stored electric charge to the coil, and along with other inherently capacitive elements of the system causes the coil voltage and current to oscillate and create radio and TV interference. The cure is energy-absorbing resistance built into spark plugs with an R in their designation.
If the gas vapor all ignited instantly it could be fired at piston Top Dead Center, but since it doesn't (and shouldn't) the spark occurs before TDC to give the flame time to spread. The timing mark is when/where the plug should fire at idle speed. As the engine speeds up the centrifugal advance mechanism rotates the breaker point mounting plate to make the spark occur about the same length of time before TDC, so a strobe timing light shows the marks appearing to move on the flywheel.
If the distributor has a vacuum advance its purpose is to advance the spark further when the engine is at speed but lightly loaded, just cruising down the highway. This improves fuel economy. Modern engines achieve the same effect by advancing ignition timing until they sense the loud onset of preignition ( knock), then backing it off a bit.
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When I entered the automotive electronics business in 1973 the above had until recently been all the electricity an automotive engineer had to know, since they bought radios from elsewhere. The new engineers Detroit quickly hired weren't familiar with the many non-theoretical aspects of electrical engineering such as component tolerance and corrosion of exposed contacts and the rushed designs of 1974 plainly showed it, though they learned fast. Some of what they introduced was taken from chemical lab instruments or military aircraft, but those were much too complex and expensive to use as-is. I had to learn fast myself in order to build the factory test stations for the new electronics they were introducing like ABS.
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Fortunately I had studied material science, combustion chemistry, thermocouples, hot wire mass air flow sensors etc in college.