I have the same issue in that I can't really read a number on the timing cover, BUT I have a timing cover off a 258 that I tore down for the crank & rods, and that one shows the first mark as 2, then 0, then up from there, so I'm ASSSUMING that it is 2 ATDC, 0, 2 BTDC,... Can't really help with timing while still hooked to the computer, I'm in bypass mode, though I did it just slightly different than the std ECM Test/ECM Test, I wen't to the wrecking yard & cut a connector with all 4 wires in it out of an old Ford and spliced that in place, using the high-end but splices that are covered with heat shrink & have sealant in them to make them watertight. as soon as it's warm enough I'll cover it all back up with corrugated plastic cover & i'll look factory.
I believe that if you actually disconnected at the dizzy end though that no signal would be getting from the sensor to the IM(ignition module, also know as duraspark) to tell the coil to fire, you need to instead disconnect one of the plugs at the IM not the dizzy(and I think there is also a jumper that needs to be put in)