[mikes2]

There is a slot in the shaft of the distributor for the rotor arm to fit into. It really shouldn't move.

if it was me I would

set crankshaft mark to the 0 in the bellhousing window. this will put #1 at tdc
check cam pulley - there's a small mark on the rear which should line up with the top corner of the cam cover. you'll see it through the rear window of the timing belt cover

If this all checks out, your timing is correct. If it doesn't you'll be 180 degrees out

rotor arm should just pull off. Sounds like it's for the skip or it's not been pushed down far enough. Either way I'd replace it