Basically this is for an old 1.2L Volkswagen H-4 (air-cooled, from a Beetle). I know how to do it, I just don't know what kind of timing light I need. Some good info though, thanks.
Any modern timing light will work. They are backwardly compatible so you do not need to get any sort of "old school" timing light. You just need to decide which features you want. On this engine you can use a home made static timing/test light and feeler gauge, the latest digital timing light and automotive multi-meter, or anything in between.
If everything (distributor, pulley, points) is bone stock you can either static time it with just a 12v (or 6v) test light or use a basic strobe. I would not bother with any strobe timing light that did not have an inductive pickup clamp and xenon lamp. Just about any new timing light should have these features but some old ones that you may find on the used market used neon lamps (dim) and some timing lights may not have the inductive clamp (PITA).
I would get a timing light with an adjustable advance feature if you are running or plan to run a non stock distributor like a Bosch 009. With these you time to the maximum advance desired instead of setting it at idle. If you do not have an advance feature on the light you need to replace the pulley with a degree wheel pulley or make new marks on your old pulley. With the adjustable advance you can time everything off the TDC mark. This is also a help if you engine has the wrong stock pulley with the wrong timing mark on it. I would definitely get this feature given the $100 price range you mentioned since the adjustable advance also lets you accurately check spark advance (centrifugal, vacuum or computer controlled) on engines ancient to modern.
I have the Craftsman model Red Green linked to. These are made by Actron and are also available Branded with the Actron name.
I have this timing light it should work for you I think
http://www.sears.com/shc/s/p_10153_...cName=Mechanics+Tools&sbf=Brand&sbv=Craftsman
the page says "Durable, 6 ft. test leads are melt-resistant" well they don't hold up if you have them laying directly on the header :tard:
The tach feature on the latest digital timing lights is very nice to have but I have always used a separate tach. You do not even need a tach if the basic timing is set at idle speed on the particular engine you may be working on.
If you are going to run you engine with points you may also want to get a meter that reads dwell angle. This is a lot more accurate way to adjust your points than just gapping them with a feeler gauge. The old analog tach/dwell/volt meters are often very cheap on the used market. Many of the modern digital automotive meters still have dwell as well.
There are also drop in electronic ignition modules that will replace the points in your distributor altogether. These are great and not very expensive ($50- $75). Pertronix and Compufire are the brands I am familiar with. These are well worth the money for the payoff in performance, reliability, and time savings they provide.
http://www.pertronix.com/prod/ig/ignitor/default.aspx
http://www.compufire.com/vw-products-main.html