Should I use a timing key. If so what key do you think??
A 6 or 8 degree should work. Oh, and dont put the wire in the key as stated above. As already said, the taper of the flywheel holds it in place, the key just locates it. Use some valve grinding compound between the flywheel and crank and lap it in until you can see both surfaces are an exact match.
More compression will help your bottom end power(and everywhere else). You could throw in a set of ratio rockers for more lift as I believe the mod2 is a stock life cam just be sure whatever rockers you have that your valve springs don't bind due to the extra lift. 22mm carbs are fairly cheap, check ebay. The expensive part is the intake manifold. If you know someone with a lathe they could make you one, that's what I did. Stainless valves will flow a little more because they are undercut and are stronger.
It's one of those things where you can just keep going and going. Whats your budget?
A lot of this will move your powerband up so you may want to lower the gearing for a better holeshot but with the the extra top end revs have the same or greater top end.