Small Engine Troubleshooting Problems? Ask a Mechanic Now.
Welcome to JUST ANSWER small engines, let me try to help you !! I don't know it all, but maybe together we can get you a satisfactory answer!
Need to check the compression, has to be over 60 psi. With spark and fuel, and engine has been running, not likley a timing problem. Much more likely to be compression problem. Common to blow head gasket on these engines from loose head bolts, related to the exhaust system.
You did say two cycle, so it has to have oil in the gas? Not a two cylinder engine? The two cylinder engine can have a timing belt problem.
I'm thinking head gasket!
Compression test will tell. I owned one of these and had no start, and only after I checked the compression, did I find the blown head gasket, and found two broken head bolts.