1. You do have it right. There are 31 gear teeth on the chain side and 41 on the cam gear side. This creates 31 possible possible positions so there are lots of possibilities to choose from.
2. I would measure you exact machine. This would assure you you know what you have and what you are getting. I only see about 2 degrees variation between the motors I work on when they are all stone stock. Cam chain stretch, cylinder height, cam gear installation, and head thickness can all be factors. In general with a stock engine you won't be even close to worrying about piston to valve interference. These motor are very spacious and forgiving when stock. You can mill heads and cylinders to increase compression a fair bit and still have plenty of room before smashing bits into each other. It is always best to measure though. You can also measure piston to valve clearances by stacking adjustment shims. For example if you currently have a 3.00 shim installed and you are wanting a minimum of 1.0mm piston to valve clearance. Place a really thin shim on the valve like a 1.20mm, then put a 2.80 on top of it. The 1.20mm shim is thin enough that the second shim will still be captured and held in place by the recess in the valve spring retainer. Now the valve is at 1mm more lift for the whole cycle and the engine can be turned over slowly and checked for interference. Note that this can be used for a stock bike because the springs will not coil bind, but just mindful of this and also that if you are really close to hitting stuff, please take valve clearance into account.
3. Added compression is a really good thing for these motors. With added compression from milling the deck height down, milling the head down makes really nice mid range. I would recommend this to anybody. Setting the squish values down to 1mm or a bit less, and then milling the heads to set final compression ratio is a great way to go. With stock cams, and running pump gas you can still go more than 12:1, but that number will work fine.
4. With added compression and cam timing there is no doubt you will should see better power from idle to redline. With just the cams, you should also get a little more punch through the midrange w/o sacrificing power else where. If you thin you feel a drop off, it is an easy thing to set the engine back to stock timing and go from there. The decompressors can be disabled easily with cams in the bike. I ususally cut the very end tip off a zip tie and wedge it into the weight so that it is stuck in the out position to disable the decompressor pin from contacting the bucket. You can test the compression as per service manual, but that does not give a full reading. I like to know what the real number is in many cases. I like doing leak down test personally, but a simple compression test does tell you whole bunch about engine health.
That is superb info Mr S. Thank you very much. My riding experience with the SV is limited to one ride home (130 miles) in poor conditions so I think I should start by fixing the known problems (which now include on the handling side a leaking fork seal and a steering damper which can only be described as notchy). Clearly there are several options here but I'm going to start with a full chassis and suspension service including a rear shock rebuild and revalve and some linear springs for the front. Engine wise it makes sense, as you say, to know what I've got first. So having checked the flywheel magnets (perfect), valve clearances and cam chain tensioners which both advanced one click as per your thread, the next jobs are to check that primary drive nut, remove STV butterflies, check compression (your para 4 esp. helpful here), adjust TPS and sync throttle bodies. At this point I'll be inclined to take advantage of a local tuning shop which is offering free Saturday dyno runs and see what I've got to start with. Then I'll start the compression , squish setup and retiming as you suggest, measuring as I go.