Thanks Neil, OM and Eddie.
As soon as I find my depth micrometer I will check the timing. I have made my own spacer.

Eddie, my only concern is the diesel engine knock. My 3304 does not knock anywhere near as bad. It may be normal. I have never heard a D330 running in person to compare. According to the manual the setting is done at TDC and should be 4.2264-4.2304" using the 2" spacer and a 4-5" rod in the depth micrometer.

Regards

Phil

Hi Phil,
The D300 series engines are not usually very diesel crackly and so are sweet running engines.
Faulty injectors or suspect cheap fuel laced with solvent, petrol etc. can also cause these engines to be crackly.
Setting the lifters on engine is the best way of doing it as it takes into account the wear in the Injection Pump (IP) drive train, the lifter and the IP plunger length.

It is imperative that you come up to the TDC mark in the direction of rotation.
If you go past TDC then you need to turn the engine backwards at least 60 degrees and come back up to TDC again to take out any slack in the IP drive train or your results will vary greatly.

The true spec for lifter setting on engine is as you have said but is more easily understood as 4.226" +/- 0.002" aiming for 4.226" to 4.224" this is what I would go for as this sets the timing advanced slightly for easier cold starting and power out put in my dynomometer tuning experience.

If you find the timing check shows the dimension way off then you will need to work out what dimension spacers you will need to rectify the measurement.
Sometimes swapping spacers about can get 3 out of the 4 correct and then you may only need to purchase one spacer.
At the Dealer we had a big rack of all the spacers available to swap about as we set up each pump.
Sometimes I would lap a spacer down a thou or so to get to the 4.224" reading.

Hope this helps.
Cheers,
Eddie B.

Watch this video he explains it really well. He's got a couple vidoes that explain the timing process.
If the link below doesnt work search Youtube for the following.

Caterpillar D2 #5J1113 Diesel Engine Assembly Ep.31: Injection Pump Assembly & Setting The Fuel Rack