Now you can see why I said Bruce and Joe are the guys - I thought 70 series engines had ignition modules. Of course a closed-up breaker gap has the same symptoms as a module failure. Loss of gap is usually due to failure to lubricate the cam on the crankshaft that operates the points.
You may have an induction air leak, which defeats the governor setting. You said you replaced the two inlet pipe O-rings: does that engine have an O-ring under the starter, sealing the crankcase? That is a common cause of induction air leakage.
What is this belt of which you speak?
If the flywheel is cracked it has to be replaced, or the engine scrapped. If it is a hub-area crack, it may have been caused by overtightening the crankshaft nut. With the flywheel cracked at the hub, the flywheel has no proper axial location, which is the reason the starting cup is loose. If the crack is at the keyway, it is also the reason for the loose key. All these problems can be cured in a couple of minutes by replacing the flywheel with one from a junked Victa - and the world seems to be full of those. I agree you wouldn't go looking for a flywheel that cost much for an old mower, but a more or less free one is a sensible solution - you haven't mentioned any faults that a flywheel change won't cure.
