HI that's a lot of slop in the chain.. replacing it would put the distributor back inline.. there is tension on the chain when running .. the way you have it posistioned showing the marks lined up there is not tension on ether side..
rotate the motor in the direction of operation and when the crank gets to TDC I'd bet the cam gear is off.. Remember two rotations to bring it back to proper TDC.
Replace the timing gears and chain
rotate the motor in the direction of operation and when the crank gets to TDC I'd bet the cam gear is off.. Remember two rotations to bring it back to proper TDC.
Replace the timing gears and chain