Sometghing sounds wrong on your main bearings. If you backed of the bolts to turn it, something is not right. Better to deal with it now, it could get more expensive after you run (ruin) it.
Did you use plastiguage on the bearings, before you assembled?
Yeah, what he said...that sounds very serious.
First, the electrics: the picture tells it all. There is no place where BOTH points are open at the same time on these points cams, so I suspect that the instructions you had were not correct. It goes like this:
1. Turn the engine until the 1-4 mark is visible in the window, then go about 1/8 turn further. This puts the points on their high point on the cam.
2. Now, set the gap on the 1-4 points at .014".
3. Next, turn the crank until the 2-3 marks appear in the window, then 1/8 turn more.
4. Set the 2-3 points at .014".
5. Now, this should be enough to make the engine run, at least, if ragged. If you have a timing light, the rest goes like this: slightly loosen the plate screws, connect the timing light to spark wire 1 or 4, start the engine, and turn the plate until the 1-4 mark for "F" is lined up in the window. Run up to 2500 RPM, and the advance marks should then appear, next to the indicator mark. Tighten down the palte screws and check timing once more, in case it moved a bit.
6. Repeat step 5, but for the 2-3 points and plug wire, and adjust the little baseplate only for the 2-3 points.
Steps 5 and 6 can also be done with a little lite bulb, like one from the 'dashboard' on the handlebars, or a 12 volts troubleshooting light: for this, you connect one side of the bulb to the little bolt where the wires connect to the points, the other to the engine case, and turn on the ignition key and KILL switch to RUN. Then, slowly turn the engine over (by that big bolt) until it's near the 1-4 "F" mark, and the light should come on at that mark. Turn the whole points plate back or forth until this is right on that mark. Repeat for the other points, using the 2-3 "F" mark. This method is called 'static timing', or 'roadside setup'.
About that crankshaft: with all bolts torqued, it will turn easily, if everything is correct. It sounds like one (or more?) of the bearings has turned in the journals. This can happen if the lower case is bumped too hard during the time when you are closing the cases: the bearing can come loose, and it misaligns at the little locating edge that's supposed to hold it in position. If you start the engine like this, it will destroy the crankshaft in seconds! Better check that now, before it gets expensive...