Yeah I read that wrong on the Dyna S manual, but yeah should be the same for my bike here. It does say start at the advanced and rotate until it lights up and is then correct.
Aha! I see your problem (and mine). You kept saying "light up the marks" when you meant
line up, so I thought you were doing this with the engine running. Yes, you can start by static timing the engine at the full advance marks. But what you apparently misunderstood is that you must rotate the advancer to full advance and hold it there manually, then rotate the engine forward (23 mm wrench on the crank nut) till the light comes on, If timing is incorrect,
then rotate the back plate in the direction necessary, wind the engine backward a bit, and repeat the checking procedure. Had you done that, the light would come on well within the adjustment range of the slots.
But holding that advancer in full advance is a pain in the butt, unless you have fingers like an elf. Forget that, and do this - center the slots in the Prestolite back plate over the mounting holes, and install the three mounting screws. Snug them, then loosen one turn or less...enough so the plate can be rotated, but not so loose it can move on its own due to vibration. Now print the rest of these instructions, take them over to your bike, and follow them exactly as you work.
Start the engine with the slots centered on the screws, and let it idle while you observe the timing marks with your strobe. The F mark may not be aligned with the mark on the case (that's okay), but you should at least be able to see it through the round window in the back plate.
Now don't touch the back plate. Just keep looking at the timing marks with your strobe as you increase the rpm. The marks on the advancer will appear to move left as rpm increases. Keep increasing rpm till the advancer marks don't move any more. At that point, the two full advance marks on the advancer should appear to be straddling the mark on the case. If not, rotate the Prestolite back plate slightly in the direction you want those two full advance marks to move, then run the rpm up again and look at the marks. Repeat as necessary. When they're centered over the case mark at 2500 rpm or higher, snug up the three mount screws, and you're finished.
Afterthought - You need to be observing the timing marks straight on through the window...not at a severe angle as in your bottom picture. Otherwise, your adjustment will not be accurate.
Stu