Right, first off you say the sprockets are the same size, but if the mag sprocket is off an earlier bike the sprocket will have 15 teeth whereas the dizzy bikes had 16. Not only will this make your drive chain slack, but your engine will only fire once every 32 revs. There are 16 tooth mag sprockets about but they are rarer so first job count those teeth, if its 15 tooth you need the matching cam sprocket, the one off the WD/16H will do, and I think the chain should then be 42 links.
If you look at the mag studs the lowest one should be plain 5/16, the others waisted, or if for a dizzy, smaller (1/4) on the mag side of the middle flange, that should give you enough movement on the mag. If you have 3 plain ones that could be your problem. I did this conversion myself years ago and bored the middle out of the original distributor sprocket and bolted it to a spigot turned onto the middle of an old Velocette magneto gear, I filed the bolt holes into slots which made timing adjustment dead easy.
I hope you're right and the chain is just worn out.Good Luck!