Well, the flywheel key was not the issue at all. Removed the flywheel and found it to be intact. Followed what testing procedures I could (from service manual) with my multimeter and found the timer base to be faulty. Found one at Van's Outboards in Grand Rapids, Michigan. Installed it and engine runs like a top. Can't believe how low I can get her to idle now that the timing is adjusting (and retarding at idle like it is supposed to). Thanks again for all your help.