470 Merc getting fuel,spark and good compression but will not stay started

I have a 1982 470 Merc. It was updated with a marine alt last year and we have never had a problem out of her. We are getting spark,fuel and we have good compression. When the starter is engaged and I hold the key it acts like it is running while the starter is engaging the fly wheel. When I let the key go it simple dies. I've always heard that you need spark, fuel and compression to run and I have all three! I'm stumped. Could the battery need replaced even though it cranks well?

 

Yes, you need these 3 for an engine to run, but the amount of fuel vs. the amount of air and the timing of the spark can also spoil the fun.
Check the timing and look for clogged jets!

 

Reply to CDK

Timing seems fine and the jets are clear. Changed the ignition switch just in case it was the switch. Still acting the same way. I will replace the distrib cap and rotar to take a shot in the dark. Thanks

 

There is a bypass at the starter to the ignition. It get power when you are cranking and will fire the engine. When you let go of the key, the power goes from the I terminal that has a ballast inline. The ignition switch is bad or the purple wire is broker or disconnected.