I reviewed a number of the flywheel keys from eBay and also looked at Marineengine.com. I don't see anything about them that would lead me to believe they are not symmetrical. And I don't recall having any strange flywheel keys on JohnRude Big Twins.
To affect the engine timing, the key would have to be staggered significantly on one side. And these are not, they're straight. No way the orientation can affect anything.
If by "upset marks" the manual is talking about the swage marks in the side of the key, how in the world would that have any consequential effect on engine timing? That's a ridiculous assumption and I'm thinking you have a Chiltons manual? I don't think Haynes would be that crazy!
This is realizing that there's essentially no adjustment for timing and the timing "stop" is just a rubber "nub" or merely a hard stop. I've never known a low-compression Big Twin to be that fussy anyway.
One thing I need to ask, have you tapped the flywheel key all the way into the key slot on the crankshaft? It is a slight interference fit and usually I'll carefully tap the key in with a small ball peen hammer.
The other thing is, the key has to be straight. The flat surface cannot be parallel with the crankshaft taper. The straight part of the key must be oriented perfectly vertical. Otherwise the flywheel won't seat on the crank.
Last thought, pull the key and see if the flywheel sits down properly on the crankshaft without. If it does, then there's an issue with the key.
BTW the '63 crankshaft P/N was superseded to the same part number that's used on the '66 40 hp powerhead. So no difference in fitment between the 2 years.
Of course we're assuming the flywheel you have is correct for the application, that would likely be the only other variable.
HTH............ed