To adjust the timing, they would have to remove the flywheel. I was going to say more likely the flywheel key sheared after hitting something (although still unlikely with swing back blades).
I remember hearing that blade carrier is more prone to causing sheared keys. But then I saw that you checked the points, so would have seen a sheared key.
I don't even work on a Victa till I pull the muffler off to see what the bore/piston is like. Hopefully it isn't scored, just a muffler clogged with soot.
Could just be something little
I picked up a 1999 Victa Pace for $15 with catcher yesterday from the tip. Its one of the ones that doesn't have a decompressor (may I just say long live the zip start decompressor haha).
Any way, looks like the poor guy who owned it before just had many little problems. Clogged fuel cap breather (actually malformed from factory and a bit of dirt),
he put a CJ8Y in and the piston knocked the electrode down to a 0.10 inch gap, the kill wires were touching due to him putting them together wrong,
the throttle cable was disconnected in the stop position, and to top it off, his brand new primer cap and metal needle was sticking closed.
With all that fixed (I actually put a orange genuine Victa needle so I can have a look at the metal one). Went first pull. All it needed was a axle clip