1979 Yamaha Exciter 440 rebuild

Starting my first full engine rebuild of Exciter 440 engine which i purchased with a hole in the PTO piston, sled is very nice other than the motor issue, doing it with my 14 year old son to keep him off the video games and learn something new. So I have no idea why it burned a hole in the piston but a have several possibilities, previous owner replaced stator prior to blowing it up, oil pump was disabled and many of the nipple caps were cracked and dry rotted, carb mounting rubber flange was rigged up and did ot look like it was air sealed, and of course crank seals. Taking it apart wanted to check the timing so i can mark it properly before a take stator off and noticed the #1 pulser coil when lined up with mark on the flywheel measures 2.70-2.72 BTDC on mag side piston, heads are off so I used the digital caliper method Yamaha440 mentioned in an old thread, could this be the reason for the motor melting the piston and would the engine even run with it timed so advanced, BTW the PTO crank seal does not look to bad, sorry for the novel, any help please,

1979 Yamaha Exciter 440 rebuild