Ignition timing....distributor off a couple of teeth...no effect on compression at all. Running? Well, teeth make less difference than you'd think...IF they connected a timing light and actually set the timing.
Distributor is a tanged shaft drops into the top of the oil pump if I recall. "teeth off" would be how the timing chain and gears were set up for the auxilliary shaft. If it's off, and you cannot get the distributor cranked in, oh, lord, you don't want to go there.
My first question with those facts would be with this data, "The engine was rebuilt a couple years ago by another owner and the guy that owns it now is putting forth that he thinks the timing is just slightly off which is why the compression is so low.", did it EVER run correctly?
If you don't set things up exactly correctly initially, some stuff cannot be easily fixed later.
Give you an example.
On mine, there is a timing mark on the bottom front of the sump. AND one on the edge of the flywheel, visible through an opening behind the exhaust manifold.
Morons that set mine up, who know how many decades before I bought the car, did not locate TDC by the book, and just threw the flywheel on. Then they set the cams with the wrong TDC, and both cams were about 30 crank degrees retarded.
When you tear something down that has "issues" you try to do it forensically so you have some data for later.
Inlet valves were hitting the pistons, two valves bent slightly, they set the inlet valve lash to ZERO to minimize piston/valve interference....engine vacuum way low, compression off, and with it being a 2.4L, with all the BS added it had the power of a Briggs and Stratton lawnmower.
So, once you run a wet compression test (one squirt only Vasili) and compare to dry, you will know f the rings are toast. If the readings stay close, then you buy the car, drag it home, yank the cam covers, obtain the cam block plates, set the upper chain tension, ensure TDC is really TDC, set your cams, check your valve lash, and then report you readings.
Before you loosen up the cam gears to set cams, if the block plate does not fit, roll the engine by hand (plugs out makes it easier) until one drops in, check the timing marks, extrapolate the distance advanced to retarded, make a note, and report here.
Remember, at that point in time you OWN a Jag with an issue that the seller is trying to tell you is timing off.
Remember, that is pure unadulterated BS.
Nobody sells a car that "just needs a tune-up" or "compression is low because the timing is off" without fixing that and getting the higher dollar figure for it.
They either know from looking themselves or have been told what the issue it.