If the coils are old, they may fail under load when they get warm, even though you have spark now. Jim Judkins has coils and condensers for Scintillas. You should also replace the top and bottom crank seals. Old Mercs .com has them. You will have to remove the magnet to get at the top seal. Will need a new impeller and 105 Lubriplate in the gear case. Probably should replace the carb float which is probably worn out cork. Good luck. I have 3 KF7s and they are great running motors. Other advice can be found over at John’s Old Mercury site. Mnay knowledgeable people there.
Good luck.

I’ll be following this thread Tubs. I actually bought one of these from Jim Judkins and picked it up at Tomahawk a few weeks ago. I have not gotten into it yet and I have very limited Merc experience. I’m very interested to see what I may find. I’m looking forward to getting it running but not as anxious to start working on it. I have a number of OMC projects lined up ahead of it.
-Ben

Removing and replacing Bendix Scintilla magnet rotor is best done with Mercury Service Tools. Magnet rotor can be broken by prying or wedging.
Illustrated parts manual is worth having. The KE7 and later 2 cylinder Mercurys
should have lower crankshaft seal renewed to prevent water ingestion .
Those who like wrenching and are familiar with Mercurys will not find
powerhead work difficult…others may differ.
Bendix Scintila magneto are a little more demanding than Repco Phelon but you
have to work with what you have.
Do NOT remove water jacket screws or exhaust cover screws unless you have to…
they are known to snap off easily…if you do need to remove assume the will snap
and use plenty of heat and tlc to free them if possible…removing broken portion
of snapped off fasteners will not be fun or easy.
Louis