Jim, 8 degrees is typical for that sort of engine. I've rebuilt lots with distributors, and played around a lot with timing. I've never worked on one with a magneto, so I know nothing about that impulse system. I doubt that ignition timing is the reason it won't start. I've had many VW engines, 36hp (revolting thing that it was), 1200, 1300, 1500, 1600, that would start easily with timing set way more retarded or advanced than that. They might not have sounded perfect, but they started.
Presumably you can see fat blue sparks? And it's getting fuel? Has the engine been completely pulled down? if so, is the valve timing correct?
The old 6v VWs were horrible to start but that was because the starter motor only got 3.6V. Presumably the starter motor on this is 12V?
Good luck.