I've used that distributor on my SOHC with good results. It's true that the bulges for the hold down in the cap prevent free rotation of the distributor, but I was able to get about 30-35 degrees rotation, which was enough to start and time the engine successfully.
Sounds to me like your water temperature sender is the hold up. Can you relocate it to a different spot and plug the hole? That should let the distributor rotate a little more, hopefully giving you the timing adjustment you need...
Jay Brown
1968 Shelby GT 500 Convertible, 492" 667 HP FE
1969 R code Mach 1, 490" supercharged FE, 9.35 @ 151.20, 2007 Drag Week Runner Up, Power Adder Big Block
2005 Ford GT, 2006 Drag Week Winner, 12.0 Daily Driver
1969 Ford Galaxie XL, 460 (Ho Hum....)
1964 Ford Galaxie 500, 510" SOHC
