I think how accurate it is would depend on the injection system you are testing. With a VE pump, you are measuring the pump stroke at the pump, so you know exactly where the timing is. The light may be more accurate with another style injection pump or injection system possibly. You could also use it to measure injection timing advance with the engine running, which obviously isn't possible with the dial indicator. Either way I have never heard of anyone using a timing light on any VE pumped diesel including the D24, VW 1.6, or Cummins B series engines.
If you do find info on how to set it up I would be very interested to see, I'm not trying to shoot your idea down here at all.
Jason
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