How does one set the timing on a 24 volt system?
The shortest answer:
The same way one sets it on a 12 or 6 volt system using the same type distributor arrangement.
The second shortest anaswer:
Read the Par 142 on pages 176 thru 181 of the M38's Operator Manual TM 9-8012.
All of the lights I see for sale are 12v.
You connect the 12V timing lights black ground clip to the engine's bare metal. You then connect the 12V timing light's red + clip to the underhood battery's + terminal. This terminal will read 12 V's.
Plus, what effect does the metal braiding have on the function of the timing light? Are there lights with connectors to the waterproof plugs? Or, is there a light made for M series motors?
The metal braiding prevents the timing light's connector from getting to the primary ignition wire inside the braid. If Fig 59 on page 180 of TM 9-8012 didn't answer this for you then go to my photo album:
http://www.willysmjeeps.com/v2/modules. ... _album.php
Then open my sub-album:
http://www.willysmjeeps.com/v2/modules. ... _album.php
Then go to my Jeep Tools subalbum:
http://www.willysmjeeps.com/v2/modules. ... php&page=1
Then open the Military Test Lead Adapter Sets subalbum:
http://www.willysmjeeps.com/v2/modules. ... _album.php

High Tension Adapter allows the timing light to connect to the primary plug lead.
Lastly, is it wise to advance the timing more than the 5 degree mark? Say, 8 degrees?
NO it is not wise. Usually results in one of the following: 1-Overheating of the coolant, 2-Hard Starting, 3-Pre-ignition.
Finally a few notes that may help.
1 - Static timing is easily done without a timing light by using an ohm meter, continuity checker or just a piece of paper..
2 - The timing light becomes a necessity if you are unsure of the governor (Centrifugal) advance system's proper operation.
You should read TM 9-1825B Auto-Lite Electrical Equipment Chapter 5 carefully and completely concentrating on the Sections I, II, & V, before embarking on this new adventure.

Must use the 1952 edition, the 1944 edition doesn't cover your distributor.
You can find most of it here:
http://www.willysmjeeps.com/v2/modules. ... eA&show=10
Specifically this subalbum:
http://www.willysmjeeps.com/v2/modules. ... tit&lid=15