Hey all, I know this has been beat to death but I'm experiencing some weird behavior that isn't typical when throwing this code.

I've recently rebuilt the heads and installed new timing chain, code was not showing before (from what I remember). Timing dots on cam/crank sprocket were facing eachother when installed, as per factory manual.

The previous owner of the vehicle said he replaced the camshaft sensor, but I have no clue if he did it correctly (heard they are abit of a pain to line up correctly?)

Anyhow, symptoms:
-runs, idles and drives fine when cold and Luke warm and cold starts fine. No immediate p0340 code
-when up to operating temp, runs fine under load, but when at a stop, engine takes a sec to come down from 1200 RPMs and bucks/hunts at idle. (~850rpms), only throws code when it's acting up.
-when Cam sensor is disconnected, all symptoms disappear.

My questions are:
1. Is the Cam position sensor only utilised during closed loop?
2. Is it possible the P/O installed the sensor wrong and is sending incorrect data? (Although p0340 is a malfunction code..?)
3. If timing chain was incorrectly timed, would this throw the code as well? Although I think if it was off, it would run horrible even when sensor is disconnected?
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Thanks for any insight.