If I set the adjustable timing light to 27 degrees, remove and plug the vacuum lines and wind the engine above 3500, should the timing mark line up in the peep hole on the shroud? Am I on the right track?

With a variable timing light, you do exactly as you say, but use the timing mark on the flywheel.
It is set to zero degrees TDC:

https://www.youtube.com/watch?v=QtPd5qzyTk8

Thanks for this. Does the mark on the flywheel line up with the case seam? Are all flywheels marked?

Yes to both.

For your original question: If you set the timing light to 27 degrees, you would need to find the TDC mark, not the timing mark, in the notch in the timing hole. You can set the dial to 0, and look for the timing mark.

--DD

Not all fans have a mark at 0 deg. TDC.
Set the engine at TDC using the rear mark, and look in the timing hole to see if there is one on the fan.

I can see the FW MUCH easier than looking down that damn hole.

Do all stock flywheels have a mark at TDC?

I know there is a mark on the fan. What degree it's set at, is yet to be determined.

However.

With the light dialed to 27, and the lines pinched, revving to 3500 and above, the mark lines up with the notch in the peep hole. I know I shouldn't assume, but that says it's TDC to me.

If it was the 27 degree mark, the car would have a slew of other issues, no? it starts fine, idles nice, is fairly quick (I've been bagging on it).

However

It seems to be running a bit hot. The temp gauge runs between the M and the P on the gauge (and on the hot day yesterday the needle was at the end of the P)

Is there an accurate place to get a temperature from?

I bought a $40 digital Multi meter from Sears that has a thermocouple temp sensor.
You can feed a thermocouple wire down the dipstick tube

Very nearly all flywheels should have a mark on them for TDC#1/TDC#3. Fewer fans have a "0" for TDC. The notch on most fans is 27 deg BTDC. If you're seeing that with the engine at 3500 RPM, something may be hosed up.

Check the photos on the Pelican timing your 914 article. They'll show you fans with timing and TDC marks.

I believe the 1.8 fans have a notch at ~5 BTDC, rather than 27. It's possible you have one of those and are off by that much. Check the position of the mark(s) relative to the fan blades and the fan supports.

Look to see if the fan blades advance (relatively) smoothly as the RPMs increase.

--DD