I used to have a '55 mercury with a Mallory dual point dist on the 292 Y-Block. I had a similar issue like you do. An old mechanic at the time showed me that the rotor would rotate inside the shaft without moving the cam for the points if you were firm enough when rotating it.
I don't think the factory dist has this feature though.
 Maybe try one more time to rotate the dist one tooth on the cam gear. From my experience you shouldn't go from the manifold to the firewall with just a one tooth change unless the area is a lot more cramped than my old Mercury.
Also, is it possible the #1 wire on the cap is off one positon ? Shift all wires one place ?

  Sal

If you are shooting for 10-12 initial advance, I would put the timing pointer on the damper to 10-12, turn key on and rotate distributor back and forth with number 1 spark plug out but connected to the wire and grounded and watch for when it sparks and set distributor there for initial testing and that should get you close. fine tune from there with a timing light.

55 Vicky & customline

58 Rack Dump, 55 F350 yard truck, 57 F100

59 & 61 P 400's, 58 F100 custom cab, 69 F100, 79 F150, 82 F600 ramp truck, 90 mustang conv 7 up, 94 Mustang, Should I continue?

Thanks for the information, I keep having interruptions but hope to be able to work on it tomorrow.

Set the points gap and close the dizzy.
Set the cable advance to base as so you can pull advance if you decide to attach it.
And time it with a light at idle and vacuum disconnected.
Simple!
Ted has noted many time the total advance should be no more than 38* with the Y
But I don't know how far the 53 set up will take you.

I understand your delema as I came across this when I had the orig dizzy. But be sure the timing mark on balancer is right and just set it accordingly.

Aligning the timing marks does not put the #1 cylinder at top dead center.  That may be your problem.

Grumpy 

I  am trying to set distributor timing and I was always starting with rotor pointing to # 1. At that position points wear block was on the flat area of distributor cam. I could not rotate distributor to the position where points would just start to open. I understand that # 1 can be anyplace as long as wiring is corrected to compensate for change. I thought rotating distributor would just put points block in same flat area, between lobes on distributor, IT DID NOT. I think I have a location that will work. Will be a few days to know for sure, thank you so much. 

Any terminal on the distributor CAN BE THE # 1 as long as the sparkplug wire that connect to it is also connected to the #1 spark plug. Can you insert the distributor into the block with room to adjust BETWEEN hitting either the manifold or the firewall? Is that the issue or is it something else? Start over and explain what you are trying to do. Pete

Don't know, when rotor is pointing to #1 points cam is almost is middle of 2 lobes on distributor. Can't rotate enough to open points.

Have not had time to work on timing. The distributor is vacuum with cable to carb linkage for advance when vacuum is low at hard acceleration.

I will try that, right now I have interruptions and can't work on car. Maybe Friday afternoon I can get back to it.  Thanks