I need to recalibrate my brain. I know it's a 505, but my XN experience is 04 vintage with points, so I wasn't thinking you were coming from an electronic setup.
Your 505's original setup would almost certainly have had a high energy ignition coil which would overheat and fail if run in a points setup. I get mixed messages from the 123ignition website. On the page with the recommended Peugeot dizzy it says it expects a 12V coil. On the support page on "what kind of coil do you recommend", their generic advice seems to be "what your car came with".
Perhaps the distributor is running too short dwell times for the 12V Bosch Blue and might work ok with the standard HEI coil. Perhaps test your standard coil with an ohmmeter. According to them, they can deal with any resistance >1.0 Ohms across the two primary terminals. If your standard coil has a significantly lower resistance than your new Bosch Blue, it will likely deliver a good deal hotter spark. That might fix your problem. But that's not the end of the story. If the 123 distributor's dwell time is like a points distributor's the coil will be overloaded at low rpm -- will tend to get hot and, sooner or later, fail.
It'd be good to check this with an oscilloscope, but that's probably a tall order. If you have an ohmmeter, compare the two coils and, if it looks promising, try the standard coil. Feel with your hand whether the coil's getting hot. It should get pretty warm, but shouldn't get so hot that you can't keep touching it for a few seconds.
Have fun,
Rob.