Roostdaddy,
Timing should not have any effect on the key unless it backfires hugely. From what I understand, that is caused by a poor fit between the flywheel and the crank tip. Your solution of using the valve grinding paste is the correct one. I did that on mine (no previous issues) and was suprised at how much lapping it took to get an even wear pattern. It's nice that with lapping the flywheel it does most of the work. Clean it up, lap it well and torque with blue loctite. Is there any chance he has the wrong key? You can also put loctite on the shaft for additional hold. Cam.