Points and advance mechanism

So it has been about +5,000 miles since I redid some of my 1977 KZ1000A.
Mainly for this discussion, a W 1075cc 10.25:1 piston kit and head rebuilt valve job with parts.
I also bought a couple new 3 ohm Dyna coils and a new electronic DYNATEK ignition system.
I installed the new coils, 8mm plug wires and 4 new spark plugs right after assembling the engine,
But I did not install the DYNATEK pointless SS system.
I just cleaned the points, realigned the gap and set timing with my strobe to break in the engine.
couple years layer:
The engine still runs fabulously after all this.
No leaks, no nothing, GREAT fuel economy... etc... so I never got around to putting the DYNATEK in.
Yesterday I decided do it! Yes, after over 5000 miles of not checking anything in the ignition.
BUT... I did check it yesterday and found this...
No burned points after those + 5000 miles.
I burnished them anyhow.
The two snubbing condensers checked at .235uF to .265uF. ( I do electronics as a job and have a very good capacitance meter).
BUT.... the 2-3 cylinders points visibly arc a bit with the engine running.
Points gaps were both still around .32mm to .35mm so I did nothing there but 1-4 cylinders were retarded about 3-5 degrees from 2-3 at around 2500 rpm-3000 rpm.
Bur the timing marks of 1 and 4, as viewed with the strobe light, jump all around at east 5-7 degrees!
The engine has a little blubber with no load on it at around that same speed.
If I rev the engine the timing marks stabilize to within the thickness of the timing marks.
.
Does this sound like a worn out advance mechanism, a bad retard spring, shot pivot points.... worn out pins, elongated holes... bad points them selves?
Other then that... this engine runs beautifully!!
And I did not install the DYNATEK yet. I won't until I further check out this advance thing.

One more thing... I an stunned at how well the engine ran and has been running on the factory KAW points and condensers for over 5000 miles...when simply set up the way the manual suggests.

Any sort of problem on the advancer would affect timing on both sets of points so I would rule that out.
I would say the results you are getting are the nature of points and the two separate sets will never behave exactly the same no matter how good the quality.
There are so many varying factors within the points assembly themselves and the condensers it could be anything from the soundness of the electrical connections to the strength of the points return springs.
Personally I would just fit the DYNA and after you discover the improvement they make to starting and power you will wonder why you didn't fit it 5000 miles ago.

Some sparking at the points seems normal in our experience. As long as there's not significant material transfer between the point contacts, the condensers are probably fine & of an appropriate value.

There's a rule of thumb with which condenser values can be tuned depending on if material transfer of the point contact material (commonly called 'pitting') is from negative to positive or vice-versa. The following is from is from an old Chevy V-8 tuning manual:
If the contact material is transferred from negative to positive point, increase the condenser capacity. If material transfer is from the positive point to the negative point, reduce the condenser capacity.

There's AC ripple in the crude stock charging system output of Z1's and earlier KZ's that can cause some timing lights to fire unpredictably. Said ripple can also cause some el-cheapo DMM's to do strange things when attempting to read DC voltage when the engine is running.

We always use a separate battery to power our timing light to isolate it from the rest of the bike. We use a good analog meter for charging system voltage testing.

Good Ridin'
sljim & Z1BEBE