I figure your distributor set screw does not hold the plastic insert that align the distributor in a fixed position, right? This part may have been broken or lost.

This plastic insert does align the distributor in a very fixed position.

The ignition sparks hit the the 4 targets in the distributor cap. As mentioned in the other replies. There is no timing done with the ignition distributor.

Wish you find the problem.

Formerly, the red block engines relied on distributor sensors for crankshaft position info. But later model B230s have a crankshaft sensor (located on top of the bell housing) that gets signals off a ring on the flywheel, and that tells the ECU of the crankshaft's position.
The ECU then decides what advance/retard, if any, is required based this and other factors. No longer is it just a vacuum advance in a distributor that rotates the distributor's plate, but it's replaced by electronic programming.

So the distributor is really "empty" -- in terms of advance/retard springs, vacuum diaphragms and such that used to be inside distributors. All it does is line up the contacts for the secondary (high voltage) paths from the coil to the alternative spark plugs, and the overlap (width of the cap's internal contacts relative to the rotor's broad contact) ensures that the paths are complete over a wide range of distributor rotation. Thus, rotating the distributor has no discernible effects until you've rotated so much that the paths are interupted -- then the engine will just die.

on these cars the EZK ignition ECU determines the timing, not the distributor. if you want to advance ignition timing, ground pins 18 and 19 of the ignition ECU. both of them. this will give you an approx 3 degree advance--do this at your own risk.

That last year timing was adjustable on the 240 was 1988