At 170 per hour on Line #1 and 130 per hour on Line #2, I expect that they just set the engine at #1 TDC on the compression stroke, stabbed the distributor in the position in the photo above, and "bumped" the engine with an air-powered starter tool until the distributor dropped.
Bumping the engine to align the oil key would change the relative piston/valve timing position to the cap, no?
I have a feeling that there must have been a timing jig to set the initial oil gear position before dropping in the distributor to facilitate engine assembly.
I found this article that describes a neat method to "walk" the distributor into position. I used the screw driver method but I'm going to give this method a try tomorrow.
Being a Corvette judge I'm sure you are aware of it.http://www.corvette-restoration.com/resources/technical_papers/Distributor_Installation.pdf
This one has links to You Tube exampleshttp://www.classiccarauto.com/impala/how_to/install_distributor.shtml
I wonder if they used something like this if there wasn't a tool otherwise.