Engine Surges on 258

I just bought a 1983 cj7 with the inline 6 258. I took out the distributor to fix oil from leaking around its base. The engine was turned when the distributor was out so I reset the timing. The timing is set correctly but now the engine surges. The tach swings from 1000 to 1500 rpm. With a timing light on the timing mark you can see it moving as the engine surges. Knowing that some of the wiring is pretty shot in the engine compartment I took off the Carter carb and replaced it with a Webber I have to see it it was the electronic controls on the carb that were causing the problems. The carter carb never did run correctly as it would never idle below 1000 rpm even with the curb idle screw backed all the way out. I assume there must have been something controlling the carb at that time as any other carb would have died out with no idle dialed into it. The Webber carb no effect as still the suring continued. Something seems to be controlling the vacum as when the engine surges and the timing changes so does the vacum. I hooked up a vacum gauge to the intake manifold and the gauge would surge along with the engine, showing between 17 and 20 lbs of vacum. I know the emission controls are not set up correctly for this california Jeep but it does not seem to be a vacum problem as I have played with all of the vacum lines with having no luck in the way it was running. Something is controlling the way then engine is working. Could it be the ignition module? Where is the seems like there is a probelm in the ignition somewhere for the engine to be acting like this. Any ideas? Does anyone know where the ignition madule is on this jeep? Chilton manual says its near battery on fender or firewall. Could not find it. Must be somewehere else