Yes , the compression cover needs to be sealed . Maybe apply a little sealer to the gasket .
And , yes , the spark should be blueish . The fatter the better .
Check all electrical connections . They should be clean and scratch tight .
Check the points . They should be clean ( no pits or peaks ) and set at .020" , at least they are on my Phelon magneto .
Also check that the inside of the flywheel is clean , no rust or other coating on the magnets . Likewise the coil core ends should be clean . You might remove the coils and insure a clean , tight mount for good ground ( no corrosion ) .
If you have a VOM , you might measure the coils primary resistance .
My OEM Phelon ignition coil measures 14.11? .
My replacement Cushman ignition coil measured 17.7? out of the box and 17.66? installed .
Hope that^ helps .
Pete .