Tom,
Are you using the original thermal vacuum switch with the 5 hose vacuum harness?
The original 68 distributor had a two-way advance unit. Vacuum was "switched" between the two sides of the diaphragm to advance OR retard the timing, depending on coolant temperature and engine vacuum levels.
Attached images show how to connect the original system.
If I remember correctly, there were 3 vacuum source feeds to the thermal vacuum switch. One was the hard line coming from front of the carb, the second was the hollow carb mounting stud (right rear stud; you can see it has a hose on it in the images) and the third was from the T fitting at the back of the carb. I don't remember exactly how the system was designed to work, but I remember that it would pull all the advance out at idle to reduce emissions.
There are two hoses that go to the vacuum advance unit on the distributor. One is attached to the capped nipple on the metal canister with the black plastic cap at the rear of the intake manifold.
The other hose the goes to the advance unit is the long hose coming out of the vacuum switch.
I hooked them up on my last 68, but I never tried to make the system work as originally intended. I plugged the vacuum hose going to the retard side of the advance can and used the advance side only. I ran directly from manifold vacuum. I retained the original switch, valve, canister and hose harness for concours judging purposes only.