The long scribed mark on the flywheel is for the belt timing. You have to remove the top cover of the distributor drive pulley to reveal the arrow, which should point directly at the flywheel when the belt is properly aligned. See diagram below.
This is only for belt alignment and has nothing to do with the maximum spark advance adjustment. There are (3) screws on the front plate of the distributor; the outer-most screw is your idle speed adjust. You need to be adjusting this with the motor in the water, warmed up, and idling in forward gear. And this mixture adjustment needs to be done at the same time you're adjusting the idle mixture on all of the carbs.
What I'll do is get 'er nice and warmed up, let it idle in gear, then start at the top carb. Screw the idle mixture screw in slowly (CW), until the idle speed begins to falter. Then turn the screw CCW until idle smooths out. Turn the screw a bit more CCW (rich), until the engine starts to falter again. It should be "burbling" from being too rich. So, whatever that range of adjustment, from a bit too lean to a bit too rich, put the screw right in the middle of that range.
Repeat for the other 2 carbs. If idle speed is too fast or too slow at that point, then you'll need to loosen the lock nut on the Idle Stop. Don't move any of the other screws! Once you've adjusted speed, you may need to readjust the tension on the throttle cable. Quite easy to do, since it attaches from the outside. Just pull the cable off and turn the adjusting ferrule to increase or decrease slack. You want just a wee bit of tension pushing the distributor into the idle stop, when you're in Neutral and have the fast idle lever down.
After you're done with all the adjustments, do a test acceleration. If the engine tends to fall flat on its face when you accelerate, it’s a touch too lean. Turn each idle mixture screw 1/8 turn CCW and it should be just perfect.
Getting back to timing adjustments, on this engine there is no marking on the flywheel, or a timing sticker. Mercury in their wisdom had a special timing gauge that screwed right into #1 spark plug hole. That gauge stopped the piston right where the points would open at full advance.
So pretty hard to simulate that. I suppose you could find TDC, then set up a dial indicator to measure the amount of piston travel, but I've never done that.
Another way might be to find TDC with a piston stop, then use a degree wheel to mark the flywheel at 32-1/2 deg BTDC. You'd also have to make yourself some sort of pointer (such as the later engines have), to be able to read TDC with a timing light, and also read the max advance mark with the light.
Note that the max spark advance for the 1963 850 FGS was 32-1/2 deg BTDC. Based on #1 (top) cylinder's points opening and firing the ign coil.
At any rate, if you haven't messed with the Timing Stop (the Lower, Inboard screw), I'd recommend leaving it alone. More important is getting the dwell properly set on the points.
If you have a real Mercury manual, it should take you thru the process of doing so. Also check old posts here in the Mercury section, 'cause I'm pretty sure we've been thru this many times.
The important thing is, the second set of points must open Exactly 90-degrees after the first set of points opens. If you had an electronic dwell meter you could probably work out a way to make that adjustment, too.
What I did was make a little cardboard box with a hole in it. Then set up the (detached from the distributor drive) distributor into the hole, so it would sit upright. I had an old rotor kicking around, so I screwed a pointer onto it. You can make a pointer that attaches to the top of the breaker shaft, easily enough.
Print out the Mercury Dwell and Synchronizing plate onto some card stock and make a hole in the center of that, so that it can be sandwiched between the dist. and the box.
You set your meter on Ohms and connect to the metal case of the dist, and other lead to the White wire coming out of the dist (IIRC). Line up the marks so those points open right on the mark on the plate. Note you’ll adjust the first set of points so it has the proper dwell (i.e. proper number of degrees between opening and closing).
After that, shift meter probe to the brown wire. Now, the points with the brown wire attached must open 90 deg after the 1st set of points. Doesn’t matter the precise time those points close, but they must fire the ign for their cylinders exactly 90 deg after the first set of points.
This is a dual-ignition setup, one set of points runs one coil and cylinders 1-3-5. The other set of points runs a separate coil and cylinders 2-4-6. And the rotor is split into 2 sections as well. If the 2 sets of points are not firing in synch with each other, it’ll create imbalances in the crankshaft which could cause poor idling and at worst, break the crankshaft!! So it is a very important setting.
BTW as I recall, an appropriate adjustment as a starting point for the points gap would be around .008”. These don’t have a wide (.020”) gap such as old magneto-powered Twins etc have.
If you get that dwell properly set between the points, and then get the idle mixture and speed set, she'll purr like a kitten.
The last screw on that front plate (Upper, Inwards) is the Throttle Stop. The distributor is supposed to stop at a certain point on WOT (Wide Open Throttle), so it doesn't force the throttle butterflies hard into the carburetor throats.
All you need is a bit of clearance (or "wiggle") on the top carb actuator, when the distributor is at WOT. This ensures you don't put too much pressure on the butterflies. If there isn't any clearance, screw the stop in to get that "wiggle". Be sure to tighten down the locknuts of any adjuster screw you move! There is a spec for that “wiggle” in the manual, BTW.
But again I wouldn't recommend moving the Spark Advance screw at all, unless you have a positive way of making the Max Spark Advance adjustment. Or maybe you’ll find one of the old Unobtainium, NLA timing stops!
I have the applicable pages out of the old Mercury Master Service Manual, that show exactly how to set up to do the timing adjustments. Send me a Private Message listing your email address, and I can forward some info to you.....ed