I don't remember if my tool worked on my 029 (converted to a 390). Anyway, after you loosen the nut, put it back on, but not snug to the flywheel. Then lift the saw by the handle and give the nut a rap with the hammer (not too hard, but some need more persuasion than others). The flywheel will pop loose.
On the integrated key flywheel, file the left side of the key about 20/1000, then make sure when you re install it that side is against the crank channel.
I left my cylinder stock, but did the muff mod and timing advance. Seemed to run fairly well (the guy that has it now is very happy with it).