79 kz650 runs good then starts missing terribly

Here's what the points are doing

New coil is on order. I guess we'll see what happens. I'm hoping the excessive arcing is due to the poorly firing coil

Does just putting a new spark plug in the #2 make the problem go away for 100-200 miles until it fouls again?

I'll go by what you said about the valve clearances being in check. Make sure you get a read on the secondary of the coil (pull the caps off the wires and remove the coil wires from the harness). The plug caps carry resistant and should also be replaced.

Have you done a carb sync?

Yes to carb synch. The plug did not refoul. But I didn't run it long because the coil breaks up when hot. The coil caps prove out resistance wise. I think the coil just gave up the ghost.

Coil is always the first suspect. The "coil" is actually a flyback transformer which is subject to the trifecta of what kills electronic devices: excessive heat, high voltage stress, and vibration. Plus it sits under the tank where it doesn't get any airflow.

New one should be here by Saturday. I'll let you know what happens

Well coil didn't fix the issue but I was able to figure it out. I had a feeling the excessive arcing in the 2-3 point meant something so I substituted the old condensor set back in to see what happens. Arcing gone, and bike runs like a dream. So it seems my 2-3 condenser was DOA out of the box. Grrr lots of time and aggravation wasted on cheap faulty parts...

That's great.... all capacitors loose it eventually.
Before figuring out my coil was going bad, I installed my old points plate, etc.
My 2&3 points were arcing a bit and I connected my high end ($$) digital capacitor tester to the two caps one at a time.
One read .26uF while the other read .099uF.
That was at 100Hz (which would be sort of like 6,000 rpm) and that is 68% less the other one.
Guess which one was having much much more of the arcing sparking? LOL!
I actually was a bit surprised by that because the bike actually ran quite well, regardless, with the two new coils, my homemade ballast resistor and two old points with a leaky capacitor.

Put quite a few miles on it today. So far so good!

Back in the day I used Ford F series condensers when mine went bad. No Kawasaki shops around.
Steve

I put 140 miles on the bike today without so much as a hiccup. I'm just going to leave the old condensers in there since they seem to be working just fine. Thanks for all your help guys