Setting the timing with a vacuum gauge is usually a better method,many things can throw off the timing like a harmonic balancer that "slipped" on its rubber mounting and now shows a false reading when you use the timing marks to set timing with a light..or if a "mismatched" timing pointer and balancer was installed..
Also many old engines run better with a bit more advance than factory specs,especially on ethanol laced gas,which is leaner than the old leaded gas these old engines were designed to use..
A book I have on using alcohol fuel as a gas substitute has chapters on advancing the timing,and how to enlarge the carb jets,as alcohol has less BTU's than gas and the engine will need the mixture to be richer to run right and not overheat.and the timing advanced..
Todays 10% ethanol isn't a drastic change but can still affect the older engines ..they will tend to run hotter and leaner with ethanol in the fuel..
I never set the timing "in gear",for safety reasons,and never had a false reading leaving it idling in park or neutral..as long as the engine is idling slow,the distributor weights wont come into play..you can turn the idle speed screw on the carb to slow it down more if you suspect its idling too fast..
I once forgot I had my truck in gear while setting the timing,with the wheels chocked (E-brake wasn't worth a dam),and I absent minded-ly gave the carb linkage a rev and the truck nearly ran me over..ever since that day I time engines in neutral..
Plugging the vacuum advance hose isn't needed,all you need to do is disconnect it--but you should cork off the nipple on the carb or wherever it was attached to so a vacuum leak wont affect your carb mixture settings..a quick way to test the vacuum advance is to put the hose on a manifold vacuum source that has vacuum at idle--you'll hear the engine speed up a bit if its working..
To me it sounds like you may have turned the distributor clockwise ,which retards the timing--moving it counter clockwise advances it..
An engine with the timing retarded will idle smooth as silk,but be a real dog,lack power and possibly spit back thru the carb or exhaust under acceleration..
A quick test for the advance weight springs under the rotor can be done by twisting the rotor clockwise,it should move about 1" and snap back when you let go of it..
The weights themselves often rust up and can get stuck in either full advance or retarded position,also the pins they pivot on often get "sawed into" and the hole in the weights get egged out..this leads to erratic timing and or no advance..
Mr.Gasket makes an advance weight kit with new weights ,a few choices of springs,and little plastic bushings to fit where the pins ride on the weights..I've cheated and just used the bushing on the stock weights when I didn't feel like experimenting with the advance curve and when it'll kick in..
The carb mixture screws affect the idle mixture mostly,I doubt them being set too lean would affect the power after 1200 rpms or so,if you set the mixture with the vacuum gauge as I described in a previous post,it should be close to spot on..