Cheapest, easiest option is to get another key. Read the number off of the ignition face. I've got several keys for my bike, a couple originals and some cut to match. Mines an NA key, harder to find. Check eBay and this guy has a bunch of keys for $10:
http://toronto.kijiji.ca/c-cars-vehi...AdIdZ314919148
Won't help with the key falling out though. Might need a new ignition. Personally, I'd run a screw somewhere and string it off so it won't be lost again. The idle cut out sounds in the carb. Is it clean, jetted and adjusted properly? Timing and points are set within spec I assume.