OK, this is not right!

I got a strobe and hooked it up. Just before this I also noted that TDC of piston 1 was pretty well where the book said it was, the lower bump on the timing cover. (I removed the spark plugs and used an old paint brush handle to find out where the apex/top was)
On idle the timing notch apparently is not at 10 BTDC, but about a centimetre away from it beyond the last mark on the left - indicating it's about 30 degrees BTDC??
I'm not sure why the engine is even running like this!
Then, I marked the original position of the dizzy, and tried retarding the ignition to about 10 BTDC - the motor would barely run..
Advancing it even further made it run a fair bit faster - and a bit smoother. I locked the dizzy in this position (about 3.5 mm from its original position) and went for a drive.
The car handled OK, I suppose. The engine was a bit more responsive but I had a fair noise coming from the tappets - rattling like anything when I put my foot down. I'm not certain but I think I noticed a torque loss travelling up a steep hill..
So I can't figure out why it's running this way, with the timing so far out..
I'm starting to think my original idling speed is too low.. I have no idea what 800 rpm is meant to sound like...
Any ideas?