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First off, K-241 is 10 HP. A little rust on the flywheel should not be a problem. If there is rust to the point that there is enough rust between the magnets and the pole piece of the coil so there is actual physical contact, that would affect spark. At any rate, lightly sanding off the rust sure can't hurt. Is there a key switch or kill switch on the machine that could be shorted out, killing the spark? If you have such a switch, disconnect the wire to it at the engine. (Be prepared to stop the engine by alternate means, such as yanking off the spark plug wire, if necessary.) Did you set the point gap correctly, with a CLEAN oil-free feeler gauge? Are the connecting wires attached to the points and condensor in such a way that nothing is shorted to ground? Have meeces eaten the wire from the points to the coil, or the high tension wire? You can verify that your points are good by disconnecting the coil/condensor wire, and checking the points with and ohmmeter between the insulated point terminal and ground. If the points check out, and you are not lucky enough to have 2 bad condensors, the coil is most likely shot.
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