Something is amiss and, unfortunately, without being able to see the engine firsthand, we're going to have to continue the back & forth dialogue until you become familiarized with the points assembly. I cannot imagine what would result in the point gap changing so dramatically & quickly. If it's a rubbing block failure, then new points ought to cure it. If it's the cam, inside the flywheel, then it'd have to beyond rough...like #36 grit sandpaper and that would almost certainly mean so much rust damage that the flywheel is only good for a paperweight, which I seriously doubt.
I've got one final "trick" for you. Set the point gap to maximum width, i.e. such that the points can just close at the narrowest part of the rotation cycle. That will give you the largest point gap...somewhere between ~0.018-0.020". You should definitely be able to see the breaker assembly opening & closing. You should also have spark, with timing close enough to get the engine to run. If the gap rapidly goes away, the flywheel has to come off to allow close inspection.