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The testing method for it would be to ohm-meter across it. If shorted then its a dud. Generally they don't fail. It is a paper/foil capacitor which will not dry out like other types. The connections to the grounds and points will be far more likely to cause issues. That said, I always replace one when I am ressurecting an engine for peace of mind. As cheap as they are it isn't a big deal. As far as whether or not it can cause a working engine to fail, it is highly unlikely.
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more likely your points need cleaning or your plunger might be worn. I have an engine that did that and now I need a plunger for it. but do the easy ones first: points and condenser and a new plug, then look at the carb. on the plug thing I like the E3 brand. switched over to them over a year ago and have not had a prob sense with these plugs. plus there life time plug if you can keep the prof of sale.

please keep us up dated ps I have had prob with the champion and ngk plugs in the past thought it was the points but got zapped in stead
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