Hmm, so the cam is showing half a link away from TDC when the crank is at TDC? That sounds wack to me
EDIT/UPDATE: Could it have something to do with the tensioner? (guessing that u have the tensioner out...and maybe the chain 'appears' longer as its not tensioned now?...not sure which side that would make the chain goto tho? suspect the right looking at the motor?)...
Is the timing chain idler pulley in ok nick?! Mine was shagged (as was the MTEU one), but seeing as the motor was rebuilt not long ago u might be ok...? If you get really stuck take the front timing cover off and line the timing up via the timing chain marks?
ps, I'm not at home atm as u know! but I have my mx62 haynes manual if u want go round and grab it? (the TSRM is all 5mge...),
OT: anyluck with that bellhousing? I suspect its a 3Y one actually (can see some pink wrecker looking pen on it :S) and I think starter and clutch slave are on the wrong side!