1965 beetle backfire on decelation / rev drop

I'm leaning towards your electronic distributor being at fault. The engine heat can cause issues. Buy/borrow a standard 009 with points/condenser. Retest it. You may need a standard coil too.

An exhaust leak can cause backfire as well.
Check for any air leaks around joints and head flanges.

Mine did this when there was a hole in the heat exchanger usually going down hill, was like a flame thrower

Often a hole or leaky joint in the exhaust system as above. Closely inspect it for any tell tale black sooty streak marks. Heat exchangers to silencers / headers is a common leaky point. Had this a few times in the past, I got to the point I could almost time the backfire exactly to make pedestrians jump especially when coming down hill. (Young & foolish days !)

Once you've ruled this easy one out then look deeper into things like distributors / carbs.

Dave.

thnaks all - will check exhaust first....