Small Engine Troubleshooting Problems? Ask a Mechanic Now.
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The first thing that I noticed in your information says that you set the gap at .005 this may be your problem. Try resetting the gap to .010 inches and see if that doesn't take care of your problem. If these coils are set too close or to wide they will not work properly. The normal gap setting is .010 inches.
It also sounds like you have the ground wire unhooked so that if there were a switch or wiring issue you have that eliminated. I believe if you will set the coil to the proper gap the machine will work. If not then I would return the coil to the place of purchase and ask for a replacement, there is no good way of testing these coils.