Yours is obviously a different switch arrangement to mine, as I only have 2 positions and there is a timer in the switch.
The fact that it will run better on the intermediate position than on the petrol position is interesting.
In your system, do you know what happens electrically when you move to the intermediate position? i.e. what does it turn off (and "turn on" for that matter).
Spluttering sounds like a fuel mix problem. This is usually, too little fuel or too much air.
I would look for problems on any of the manifold vacuum hoses. Vacuum advance, engine performance guage if fitted, brake booster hose. (Rough running on petrol was a problem with my RRc recently, although an EFI engine, the problem was a small vacuum hose disconnected off the manifold plenum chamber sucking air.)
The other issue of a partially blocked needle and seat is still an issue worth checking. Wax can solidify out of the fuel if it is not run on petrol for a period of time, this will cause fuel starvation. Although that it runs on the intermediate switch position seems to discount that as a cause.
A third option is a distributor advance module malfunction putting the timing out slightly when on petrol - although unlikely.
Sorry I can't be of more help.
Diana


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