In the ignition department,the Type 4 shares compatibility with the Type 1 engine. Both engines use a similar Bosch distributor with conventional points and condensor with 7mm wires delivering the spark to the spark plugs. The Bosch Blue Coil is the stock replacement in the Bosch catalog for both engines.
Vacuum advance/retard: Recently there has been a push to use vacuum advance distributors in street and performance engines. The vacuum advance/retard distributors, like the ones on the stock engines, allow for some self tuning on the road. Distributors like the 009 and 050, discussed below, only rely on engine speed to control the advance. Distributors with vacuum pods either use the engine vacuum alone, or in addition to a centrifugal advance, to control the spark advance.
For instance, going up a steep hill slowly with the engine turning 3000 rpm requires different advance needs compared to a car traveling the highway at 3000rpm. Without going into too much detail, rest assured that there was a reason that VW didn't stick with the all centrifugal advance distributor on the later Type 1s. You can find ready to drop in vacuum distributors from aircooled.net.
The real difficult part of using the vacuum distributors on a converted Type 4 is tapping a source of vacuum at the carbs. Dual Webers or Dellortos will have to have a small hole drilled into them and a fitting installed. This fitting will provide the vacuum for the distributor.
Bosch 009: The Bosch 009 is hard to beat, as most every VW enthusiast has at least one laying around in the garage and they can get them rather inexpensively from most all VW vendors, but it is not the only option. There are at least three different models of 009 distributors: a German model (identifiable by the "Germany" stamp on the bottom), a Brazilian model, and a chrome Brazilian model (which ends with 094). All three of these distributors have different advance curves, some advancing sooner than others.
HotVWs Magazine had an article one time where they measured the advance curve of the common VW distributors. If memory serves me right, the chrome 094 had the fastest advance curve, the Brazilian 009 was a bit slower, and the German 009 had the slowest advance curve. So of the 009s, the German 009 is the one to use, as the slower advance curve is best suited to the Type 4's plentiful torque curve.
Word of advice: Many parts shops sell transparent distributor caps in a variety of colors for the 009 and some stock distributors. My experience, along with many others, is to never use these caps. They can't seem to take the heat and crack easy. Others have reported watching a fireworks show in the dark as the spark traveled through the cap and grounded out on the alternator, fan shroud (Type 1), and the fuel pump!! That's a disaster waiting to happen. Stick with the authentic Bosch parts for the Bosch distributors.
Bosch 050: According to my European contact, the 009 has too narrow an advance curve and they prefer the wider advance curve of the 050. I've also been told that the Bosch 050 was designed specifically for the Type 4, but I've never been able to confirm that statement. Fortunately the 050 uses the same electronic conversions as the 009, so using a Pertronix or Compufire conversion is a suggested modification. The difficulty with a 050 is finding replacement cap and rotor. Very few suppliers here in Southern California still have cap/rotors available, but CB Performance would be my first source to find them, as they've marketed them for a long time.
Mallory: Recently the Mallory distributor has made quite a buzz in the Type 4 builders circle. Jake Raby of Aircooled Technology has ran dyno tests with the 009 and the Mallory on the same engine. It seems that the high quality nature of the Mallory distributor gained a few more horsepower. I don't have much else information on this distributor, but I will report back with any new details.
Others: There are many there alternatives can be found from Stinger, MSD, Compufire, Vertex and other ignition maunfacturers. If you are looking to spend this much money, make sure you are getting something that's been tested with an air cooled car. In this price range an adjustable advance curve is a must, so make you get a distributor that is adjustable. With your engine on the dyno, you'll be able to tune the advance curve easily to what your engine runs best at.
Electronic conversions: The side effect of being commonly used on Type 1s, the 009, 050 and most Bosch vacuum advance distributors have many different electronic conversions available for them. Both Compufire and Pertronix make drop in conversions for these distributors that are inexpensively available. I haven't seen any dyno tests showing whether these electronic conversions make more power over points, but they keep the timing consistently on the mark, and they don't experience point bounce at high RPMs.
At the very least, these conversions allow for consistent timing, since the points are removed. The timing should still be checked at every valve adjustement, but it shouldn't be needed to be adjusted. I'm using a Pertronix conversion right now in a German 009 and I've been pleased with the performance.
Bosch Blue Coil (stock): The next component in the ignition is the coil. The Bosch Blue Coil is now the stock replacement coil for the Type 4 engines, so you can't go wrong with it. The Blue Coil is the stock replacement coil for the Type 1, so purchasing it is quite easy.
Bosch Red Coil: Another offering from Bosch is the Red Coil, and I've been told that it has a hotter spark. But like the 050, I've never been able to confirm this statement. The Red Coil does require an external ballast resistor, so make sure that you purchase it with the coil.
Higher performance: Beyond these two, you are best to use a coil matched to the distributor that you intend on using. These are available in kits, like the Stinger.
As for spark plugs, all Type 4s use the same thread as the Type 1, but with longer threads. Stock plugs in the Bosch line are the W8CC and the cooler W7CC.
I have not heard from a lot of people who have had good luck with the Platinum plugs, so for my money, I stick with the standard copper electrodes. I don't know if the multi-tip electrodes (like the Splitfire) are available for the Type 4, but my days of playing with water-cooled VWs showed no improvement over the standard plugs.
Stock: For almost all of the Type 4 engines out there, the 7mm Bosch replacement wires (09-171) are the best in performance and reliability. They will live a long life in the extreme heat of an air cooled engine and provide great performance for a reasonable price.
High performance: When you step up to a hotter ignition, an alternative in wires must be found. Spark plug wires are available in different sizes, usually 8mm and 8.5mm. It's suggested to contact the vendor of the distributor and coil and get their recommendation for wire size. There's no need to pay a lot for 8.5mm wires if there is no hidden power to gain from doing.
Somethings to keep in mind when shopping for larger wires. Make sure that the wires you are buying are specifically for an air cooled engine with the proper air seals at the head tin. The wires should be able to withstand the extreme temperature range of the air cooled engine. Most of the cheaper "high performance" wires are designed for water-cooled cars and crack when subject to the temperatures that air cooled engines operate at.
Another word of advice: Make sure that the wires of the best quality. The colored wires offered by a lot of part houses can not stand the heat of an air cooled engine and get brittle. This brittleness causes the housing to crack, and the cracks could lead to arcing out and a loss of spark at the plug, at best. At worst, it could cause an engine fire.
Well, on to my recommendations. For a mostly stock or mildly tuned engine, I'd go with a Bosch 009 (or 050) all-centrifugal advance distributor (since most people have these laying around), standard plug wires (quality similar to the Bosch wires), and a Bosch Blue Coil. This ignition will provide a long life and intense spark for a modest investment. At this state of tune, you probably won't see any gain by purchasing one of the ignition kits from Mallory, MSD, etc. If you plan to drive this mild engine pretty hard, go with the W7CC plugs, as it will not create the detonation in the combustion chamber as the temperature increases.
If you are building a Type 4 with more get up and go, but you still want it to be ultra reliable and drive-able, I'd look at using a vacuum advance/retard distributor, like the SVDA from aircooled.net. This will have the engine smooth as silk and will lead to a long life. The extra work involved in the conversion requires an extra cost, though it should be minimal.
Now, say you've got a highly modified Type 4. You've got the high-lift, long duration camshaft, the stroker crank, big bore piston/cylinder kit and those all-important dual Weber 48IDAs, and you want to get the most power out of this monster. This is where you want the high output ignition kits. On an engine like this, you will want to run the W7CC spark plugs or a colder alternative. Does anyone know if they make a W6CC? :-)
Thanks go to Rolf Christensen, Shad Laws, and Jake Raby for sharing their experiences and knowledge of ignition systems. With their input, this article could not have been as enlightening. Thanks guys.