According to my recollection of the book, #4 is correct for the alignment you describe. The notch offset forward would point the disti at #4 on the cap. I know it doesn't make a lot of sense, but that is how the book says to line it all up. My 1980 was put together backwards by the prior owner and it took me a while to figure it out, finally got it running by swapping the plug wires on the cap 180 degrees.
You don't mention where the camshaft marks are pointing, that makes a difference too. With everything lined up like you describe both valves on #4 should be closed, the mark on the camshaft should be right on the top aligned with the mark on the rocker shaft holder. The head was redone on that 80 I have and I think the cam was what got put in backwards.
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95 Isuzu Trooper Daily Driver
86 Isuzu Trooper reliable backup
77 LUV 2wd stock beltway blaster (resting)
79 4x4 LUV project: 2.6L, 5spd, 31s (eventually)
MEPR: Man, my 4x4 makes all other LUVs look good
