[scarceller]

One more thing: can you please take pictures of the inside of the cap and the rotor so we can see them? Also the inside of the distributor with the cap and rotor removed.

Have you tried spraying water around the wires while at idle? You need to keep in mind that the 5400-5800RPM area is the peak torque area for these motors and if an ignition component is at issue it's likely to fail at those RPMs. Spark plug gaps need to be at 0.7mm and no larger. I also recommended looking at the wires and ignition system in the dead of night with the engine at idle to see if you can spot any arcing. A spray bottle full of water can be used to spray at and around the wires to see if that yields signs of arcing.

But it's also important to rule mixture issues out first, I always rule out mixture issues first since that's easily done with a WBO2.