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The points setting tool is very handy. However, it doesn't allow you to set to a gap bigger or smaller than that. Once must actually find the high point on the cam and then make manual adjustments.
Yes, if you have the Chinese points, you might as well stop until you get a replacement. As has been shown, the rubbing block is way too big and the gap can't be set. I suppose if there was a way to precisely shave off the offending part of the rubbing block, it could be reused. But that's likely difficult to do...easier just to install correct points.
The point gap is set with the points rubbing block riding on the highest part of the advance cam. There is a tool available from Cycleworks that replaces the advance unit which allows for setting the gap without having to work around the arms of the advance unit.
It does look like your points are not the offending one. Here's something that compares the two side by side:
https://forums.bmwmoa.org/showthread.php?69216-78-R100-7-points&p=885249&viewfull=1#post885249