ORIGINAL: IONIC-M
The pistion and ring look ok. The marks on the pistion almost looks like it was ran alittle hard before it had a chance to warm up.. There is a little pin in the ring grove on the pistion that is where the ring gap goes. And you said it your self that the coil was riding on the flywheel. That sounds like that was the problem..Put it back together and it shoud fire right up!!
I agree, it actually looks like the break in was skipped to me..... Since you have it apart, and it's cheap, you might as well rebuild.