Here is one way to look at it
Step 1: Finding True TDC
The tool that I made is two parts: a spark plug adaptor that I found at the auto store ($4) and some random bolt I had lying around. The adaptor is threaded the same size as the spark plug, so you just screw it in to the engine. I tapped a hole that was in one end of the adaptor and just screwed the bolt all the way in. You just want to make sure that this bolt protrudes well into the top of the cylinders, so that if you were to rotate the crank the piston would hit it and stop on its way up to TDC.
This is how you use it. You must have a degree wheel on the crankshaft and a pointer made out of a coat hanger set up in a way as to help you read the degree wheel. (see the picture) What you want to do is rotate the crank so that the piston is located somewhere B(efore)TDC. You can approximate this by peeping in through the spark plug hole with a flash light; you will see the piston begin to approach TDC as you rotate the crank. At this point stop rotating the crankshaft and screw in the tool you made. Now slowly continue rotating the crankshaft CCW (towards TDC) until it bumps on the end of the bolt protruding into the cylinder. Be careful not to gouge your piston. Make sure the piston is resting against the bolt and set the degree wheel to 0 degrees. Now you unscrew the tool you made and rotate the crank to a point somewhere A(fter)TDC. Again you will screw in the tool and rotate the crank CW until the piston bumps on the bolt. You must read the degree wheel as the piston rests against the bolt. Take this number and half it. The resulting number is the location of True TDC on the degree wheel. You must ensure that the degree wheel does not spin independent of the crankshaft while you perform all these procedures, or you will need to start over.
Step 2: Valve Timing
The purpose of the dial indicators is to let you know when the valves begin to open, and to measure the amount of valve lift. The idea is that you want your cam and its lobes to be spinning in a way that all opening and closing of the valves occurs at the optimal time within the 4-stroke phases. So you must set your dial indicators perpendicular to the surface of the valve-spring retainers. What you do is set the degree wheel so that 0 degrees is at TDC of the crank. Rotate the crank 1.5 full revolutions going CCW. This is to make sure there is no slack in your cam chain. As you come around to 1.5 revolutions start to carefully monitor the dial indicator to see when the valve starts to open. This should occur at 36 degrees BTDC (this spec is true for my 1981 engine, at least).
There is another way involving the lobe centers, see my other thread for details.
Thank you very much for the info.
Now to just try and understand it all.