I checked my 401, the needle thread is caught by the hook then pulled around on the inside of the race and the outside of the case along the back left quadrant then is pulled up over the case about the middle of the left side of the case as it is released from the hook. I used the service manual at Central Michigan Supply to check and adjust timing on mine, which I would do on yours along with checking all the surfaces along with proper seating of the case. The case should have noticeable wiggle when seated.
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