1.i always use the bottom timing mark as in the pic for cambelt timing. but i'm thinking that this engine's head may have been skimmed a fair bit, which, when you think about it, will move the cam timing, because you can't actually skim a cambelt to match....
2.cambelts stretch, that doesn't look like a new one...
3. have you tried moving the cam pulley one tooth forward to see if it runs any better?