Sorry. I should have said, after you've got the camshaft correctly positioned and locked up then turn the crankshaft back to it's locking position with the dumbbell tool. So the crank and cam are both locked up before you try to fit the cam belt. Turn it very gently just in case a piston touches something. I don't think it should but, if something is seriously wrong inside, it might. Of course if it comes into contact with something you've got a serious problem to go looking for.Thanks, that's good to know the plugs are out and that it's a non VVT - still going to have the unkeyed cam pulley though unless I'm very mistaken (which I don't think I am)
I'm finding it just a little difficult to understand some of your description of what exactly you've been doing but you speak of the cam being a quarter turn out with the crankshaft locked up (with the dumbbell tool I guess?) If so the crank and cam are obviously not timed correctly. So, what I would try first would be, with the timing belt removed, set the pistons all half way up/down their strokes. - so all well clear of the cylinder head/valves. feeling for No 1 and No 2 with a screwdriver in their plug holes will confirm this. Then rotate the cam shaft until the cam locking tool can be inserted into the slot on the back end of the cam (you have got the cam cover off haven't you?) this will put both crank shaft and cam shaft "in time" with each other. Of course the valves will move as the cam is rotated but no harm can come to them as the pistons are well down the bores. Now fit the cam belt with the "drive side" (so cam pulley, round the water pump to the crankshaft pulley) as tight as possible. You may actually be one tooth out if you don't remove the crank locking tool and turn the the crankshaft about half a tooth anticlockwise until the tooth drops in. However, even if you're one tooth out you should now have an engine which can be turned by hand quite easily and with minimum resistance. If you put the plugs back in it should run although, if it's one tooth out it won't run particularly well. All the above presuming the main cam retaining bolt hasn't been slackened. If it has then all bets are off as you'll need to do the full timing procedure to get the cam pulley back in time with the crank.
Reading on a bit further it does sound like some quite serious damage was done by the previous owner so there may be other issues we can't possibly know about. Good luck