The engine should start and run with SPOUT disconnected, does it run?
Disconnecting SPOUT is how you set base spark timing
When SPOUT is connected the computer is now advancing the spark timing
TFI system is pretty simple but prone to failure
The sensor in the distributor, hall effect sensor, generates a PIP signal, basically it is the "Points" like in older distributor
This PIP signal goes to the TFI module
TFI module uses the PIP signal to unGround the Coil, which causes it to spark
TFI also sends the PIP signal to the computer so it can time the fuel injectors
The TFI module has an RPM advance calculator, so it advances spark timing based on RPMs, but has no "load calculator", this was known as Vacuum advance on older distributors
The SPOUT wire is the Load calculated spark advance sent from the computer to the TFI module, since computer has the throttle position sensor and MAP sensor its in a better position to calculate engine load
If the SPOUT wire to computer was grounded out that could cause TFI module to shutdown spark
So check it that has happened, use ohm meter to see if there is a short to ground