Ok, back to ignition.
Many of these DID have a neutral safety "device" consisting of a "reed" switch, a magnet to keep the switch closed and a "y" shaped piece of metal used to interrupt the magnets pull on the switch. These were mounted on the shift lever shaft just onboard of the right side engine enclosure. They are easily identified by the Y shaped piece of metal clamped to the shaft. Many have been removed or bypassed by now. Testing (and bypassing) consisted of connecting the two wires going to the switch.
I'm assuming that this is a CDI system due to it being mid 80's. Please correct me if that's not the case.
The ignition system consists of:
An exciter coil to energize the system located under the flywheel, right side.
A pulsar coil to do ignition switching located under a cover atop the camshaft.
An ignition coil to fire the plugs located at rear of outboard.
CDI "box" for achieving ignition timing advance per rpm.
Engine switch otherwise called kill switch.
Here are the ohm readings I've come to expect on a working CDI ignition system:
Exciter coil....330 ohm. +/- 10% (for temperature)
Ignition coil...31.5k ohm.. +/- 20% (for temperature)
Pulsar coil...120 ohm. +/- 10% (for temperature)
While the CDI controls ignition timing, it should be noted that it depends on correct cam to crankshaft timing to achieve good results. The timing belt condition and alignment should be checked along with valve lash settings and compression when evaluating an engine's "runability".
I hope you can get her going. These are sweet old outboards when correctly maintained.
Good luck.