Rotor Key way...

Stuart,
Woodruf keys can be a challenge especially if they're a little loose in the keyway. Your idea of holding it in place with RTV was a good one as long as you didn't allow it to get into the seal. You said you smeared a little on the seal to hold it in place. It shouldn't need anything to hold it. It should be a press fit into the case. If it was out of its bore there's a chance it was damaged by the magnet (rotor) rubbing against it. I've found them from the factory that were not driven into the bore correctly or not deep enough. When done right they should lay flush with the motor case and not protrude at all. Run the engine for a while then check to make sure you're not seeing oil inside the mag cover. Oil or fuel residue will tell you the seal is leaking and that can cause a lean condition caused by air being drawn into the crankcase through a bad seal. This will result in a poor running engine the same as if you had an air leak around the carburetor or intake manifold. Good luck, keep us posted.
Tom