The coils draw power and store energy when the points close. They fire spark plugs when the points open.
The points complete a path to ground (eventually the path to Battery Neg terminal).
If, as you rotate the crank, neither the blue nor the yellow ever reaches ground potential, the coils can't work. Assuming the yellow and blue wires connect properly to the points, either your points are not mechanically closing or there is a film that is coating the points contacts which prevent the wires and coils connection from achieving the ground potential and completing a circuit. Some films are transparent. A points file is recommended to break through or wear off the film (not silica abrasives which will ultimately shorten point life).
The engine case needs a solid connection to the frame metal, not paint, which is an insulator for electrical current. The battery NEG cable normally connects to engine and frame, on paint-free surfaces. If these surfaces are insulated with paint, you will have quite a few electrical issues.
Also, if you have painted the engine where the points plate mounts, the paint can prevent electrical flow there as well.
In general, wherever you want current to flow, you must not only have power flowing to the device, but there must also be an effective return path back to the power source.