That's how I've always done it - with a card that mics to 0.010. When I noticed the spark was stronger at fastest rpm while pulling, I reduced the gap to .005 and spark improved but still not firing, even with a prime. Now that I think about it, if there was enough sawdust blocking airflow and causing high heat, maybe that reduced the strength of the magnets but again, they feel as strong as any I've worked on.
It takes an awful amount of heat to demagnetize something, like a torch.
Pm me your adress if you think its the flywheel.
I'd peek down the intake and get a look inside of the cylinder also.