Don't know about testing the coil as they almost never go bad. The main reasons for no spark are:
Rusted magnets/contacts on coil and flywheel. Sandpaper the rust away so you can see bright metal on all steel surfaces.
Points slipped/frozen/dirty. Clean and and reset to appx. 17 thousands with a feeler gauge or dollar bill
Shear key between flywheel and crankshaft. If the blade hit something hard, it could have partially sheared the aluminum key throwing the timing off. You would still have a spark, however the engine will not start.
My money is on rusted magnets! This is extremely common if the engine is exposed to any moisture. Even high humidity can cause rust over the winter when they sit unused. It would be a good idea to replace the points and condenser as well as the spark plug while you have it apart
Be sure and check the key for any signs of damage noticable as an indentation where the flywheel and crankshaft meet.
In my younger years, my ex father in law and I used to repair and sell used lawn and garden equipment for a second income. I still do all of my own repair work including complete overhauls. I can only remember seeing one or two coils that were bad and that was because the plug wires were ripped out of them.
A continuity check doesn't tell you much with those coils. They can seem to check good but not spark because the high voltage will leak across the coil but the low voltage from a test meter will not. Its not a common failure though.
The first thing I'd do is to make sure you check the kill lead. I find that is the most common problem with no spark is that the kill wire gets pinched under the cover somewhere.
Second, I agree to check for good magnet function.
Third, check the points. You can do this with a meter before you pull the flywheel.
If you find the points are bad and you have a little extra money to throw at it I'd change the coil out to one that doesn't use points. They are the coil found on the IC series engines and are available as a retrofit to virtually all of the engines. As a side benefit you'll get a stronger spark which makes things like hot starts easier. No more pulling the flywheel to change the points either! [img]/ubbthreads/images/graemlins/smile.gif[/img]
The flywheel key can cause a no spark situation if it is out of time with the points by 30 or more degrees from a sheared key. A partially sheared key can cause a weak spark that you can still see if the plug is out and you watch the gap but it won't fire when its in the engine. If the key is sheared don't put a steel one back in to keep it from shearing in the future. Its designed to be the weak point intentionally.
Good advice. If it has points and a condensor, I would check those or rip them out and put in an electronic module instead. ALso the gap between the coil and magnet can cause it to not fire, it has to be very close, unsure of specs.
As for testing it, I get some dolt to hold the plug wire while I reach back and give the starter a good hard pull and watch their reaction. [img]/ubbthreads/images/graemlins/smile.gif[/img]