Hi ukzknos,
I have had the Omega Ignition and Omega 400 watt alternator on since 2006.
I started at setting #4. I am currently using setting #7. I had no trouble at 4 but it annoyed me that I was not using the stock range of advance.
What I mean by this is the stock range is from 6 degrees BTDC at idle to 32 degrees at the 'z' mark. At position 4, if I set the timing to the idle 6 degrees then I would never see the z mark in the window at 4000 rpms. SO I compensated and set the idle timing past the idle mark at about 8-10 degrees idle advance so I would see the z mark at 4000 rpm. I ran this way till last year when I saw a diagram (now gone) of the advance curves. It looked like 7 would more approximate the stock R65 curve.
SO I re-adjusted the idle advance to 6 degrees (the drilled hole in the window) and then slowly turned up the advance setting to 5 then 6 and then finally to 7. What this did was to lengthen the advance range. And low and behold when I set 7 for the advance curve it I get idle at 6 degrees and full advance at the z mark.
The latest instruction recommends that you start at setting "0" (which is no advance) at the idle setting you want and then use successively higher settings until you get the full advance range and point that you want.
Now every bike is different and if 3 works for you then that IS FINE!
BTW - I am also using a Dyna coil and NGK BPR7EIX plugs and 0 ohm NGK caps on my March 1980 heavy flywheel R65 with Flat Top carbs. I also marked the Flywheel Idle Mark and "Z" (fast) mark with a little painted dab of white-out so that they would be easier to see under the timing light.
Good luck.
This advise worth maybe 2 cents. Not what it used to be....