To answer your questions: 1 - you gap the points where the red arrow is - should be some resistance when the feeler gauge is pulled through. First, turn the the crankshaft until the cam pushes the points open. Really you should remove them, true up the faces on a stone then wash in petrol, but if they aren't too bad, just use some light sand paper or a points file and wipe with a petrol damped rag.
If the gap needs changing, undo the screw (most likely the one circled, but I am not familiar with this system) and adjust to right gap, hold position and retighten screws.
drip some oil on the felt pad (blue line on right) - to prevent wear to points leg (labelled PL)
2 - that will change the timing - you may now need to retime it. There will either be a 2 marks to align, or you will need to measure the piston so many mm from TDC
