OK I've watched videos, read a few "how to" articles and am baffled. I'm doing a mild restoration on an RT3 and in setting the points gap/timing I'm at my wits end. Setting the gap is straightforward, but the timing... I hook my Fluke multimeter up in the diode "beep" setting with one lead attached to engine ground (engine is on the bench) and the other lead to the black wire coming off the (newly refreshed) stator plate/points. Even with the points open I get 'continuity' to the point that the beep never goes off. I figure ok, there's somehow current able to leak through whatever stator winding the points lead goes thru (the ignition winding) so I switch to just the ohm meter function and figure when the resistance jumps up that's when the points have opened. Resistance is close to zero (2 or so ohms) when I'm not turning the flywheel. As I turn it the resistance jumps around a fair amount but when the points open there's no significant jump in resistance. How can this be?

I checked another RT3 I have (its a sickness as you know) - it runs fine. When doing the same test with it I still get a beep all the way around when turning the flywheel, but at least the resistance on that bike does a noticeable jump when the points open. Still, it's not the clear cut "OK you've now gone from continuity/short to an open circuit" type of jump I'd expect.

I called a friend who just recently replaced the points on his RT3 and he had the same issue. His advice was to just set the points gap to spec and run it. That's what he did and his bike runs fine. Is this an issue others have seen?

I don't have time right now but gap determine timing so don't just go 15 thou & assume it's right for timing. Bottom line is at 2.9 bdc the points should be 'agreeing to part'. What I'd do is see if it sparks as it is sitting now on the bench. Just spin it reasonably slowly with a drill anti clock ant have your coil attached to the motor & to the black wire, just to see if it's all ok despite confusing readings. Plus a spark plug of course.

Similar questions have been asked and answered on this forum hundreds of times. 
Short answers (short for me anyway )-
You set timing by adjusting gap to get points to open with piston at the correct distance BTDC.  Points Gap (if you want to check it) should be in range listed in manual after timing is set on your model.  Done.  DO NOT ADJUST GAP OR YOU WILL MESS UP THE TIMING YOU JUST SET.
Points closed should read zero ohms.  Points open should read around two ohms +/-.   You probably won't have spark on this bike because your points sound like they are not making good contact when closed.  (Clean your points... yes, even if they are new.)
Setting points to a specific gap instead of setting the timing correctly can be done... but is a dangerous game on a 360.  It's your ankle and your piston though.  If you choose not to set the timing properly, I'd set the max points gap at the very bottom of the range... something like 0.012". 

RT325 snuck in there while I was typing...  and again there are many posts on this here.

I did dress the (new) points with some fine sandpaper as I was struggling with this. As I turn the flywheel the ohm reading goes all over the place and when I take my hand off it'll settle down to a 'baseline' reading of around 2-3ohms (points closed). I've put the top end back on but I did bend the tab that lines up with the red mark on the flywheel to line up with the 2.9btdc so at least I don't need to pull the head again to check this. I'll fiddle with it some more and report back, thanks for the help guys and sorry for retreading old ground on this topic.  

I'll also get an analog ohm meter with the X1 reading (hopefully will be here Monday), as yes I'm using a digital gauge for this and it sounds like that's adding to my confusion.

Try cleaning the points with strips of clean white uncoated business card stock...  strips of 3x5 cards might work too.  Don't use card stock that frays easily... you don't want card stock that might leave a tuft or paper fibers behind on the point contacts...  Close the points on the strip and pull it out.  Repeat with a new strip until it comes out clean.

A microscopic bit of grit from sandpaper can be enough to prevent a zero ohm reading with points closed. 

Not sure if I'm thinking right but turn the flywheel to open the points & leave it there. Then slide a tight feeler blade in & note the change of ohms. It should react like open then closed just to see if it's doing what it should. Not accidentally trapped the points wire under the insulating washer? or lost the centralising bit through where the wire connects-think modern ones have a plastic stepped piece do can't go wrong. Maybe I'm thinking back to front with Mark saying clean the points so don't dwell on my post.

My new $18 analog ohm meter showed up today, complete with the setting to measure down to 1 ohm (R1x). With points closed it registers 1 ohm, when points open it jumps to 3, a very noticeable jump. I set it to the mark I lined up with 2.9mm btdc (it was opening a bit late before I adjusted it) and the bike now runs like a champ!

Bottom line, I was wasting my time with the digital meter, the analog is the only way to go. Thanks for the help guys!

Doesn't matter but was the meter zero' out on the low scale as I think it should be zero when closed then approx two ohms. Yay she runs!! Congratulations. Just going by what Mark says often? If I'm not misquoting him.

The meter wasn't even reading zero ohms when I touched the leads together, it was at 1 ohm. So for this meter, 1 ohm must indicate a short. But yes, it did jump from 1 ohm to 3 ohms (so a 2 ohm difference) when the points opened.