Pete, don't be surprised that drying out the interior didn't make it go - it was one of the things that had to be done, but there may be several others. Did you squirt a bit of fuel into the plug-hole and try to start it? That isn't necessary if the primer is working, but let's not bet on that - it could be delivering a small amount of fuel and still look as if it works.
If the engine won't start with spark, a good (new) spark plug and priming, there are three main possible problems left: wrong ignition timing, an induction air leak (perhaps through the crankshaft seals), and a choked-up exhaust port or muffler.
When you said you have compression, you were talking about cylinder compression. A crankcase-induction two stroke won't start unless it has crankcase compression as well. If you can get access to the top and bottom crankshaft seals (where it goes through the crankcase) you can test them. Put each seal in turn on top, and trickle a little fuel onto the seal. If it vanishes into the crankcase, you have found a fatal fault (but not necessarily the only one). Remember, test both top and bottom seals.
The yoke and weights under the flywheel are the centrifugal spark advance mechanism - a rare and very useful feature of your engine. However it is a complication, and it is always possible that when you worked on it you somehow reassembled it with the ignition cam (which opens the points) in entirely the wrong place. That could even be why your flywheel won't go on properly, and why your engine won't start, too. It could even explain why your spark intensity varies, if the points are breaking when only the edge of the magnet is passing the coil.
