THE PLT RPRTD THE ENG STARTED & RAN NORMALLY BEFORE TAKEOFF. HOWEVER, DURING FLT, IT BEGAN RUNNING ROUGH. THE PLT REDUCED THE POWER SETTING WHICH INITIALLY ELIMINATED THE ENG ROUGHNESS. HE CHECKED EACH MAGNETO & NOTED NO MALFUNCTION; HOWEVER, WHILE DIVERTING TO A NEARBY ARPT, THE ENG AGAIN BEGAN RUNNING ROUGH & A SEVERE LOSS OF POWER OCCURRED. ACCORDING TO WITNESSES, THE ACFT STRUCK A PALM TREE DURING A LEFT DESCENDING TURN AT LOW ALTITUDE & CRASHED. THE ENG WAS EQUIPPED WITH BENDIX MODEL S4LN-200 SERIES MAGNETOS. DURING A BENCH CHECK BOTH MAGNETOS BEGAN MISFIRING AFTER ABOUT 15 TO 20 MIN OF OPN. DISASSEMBLY OF THE MAGNETOS REVEALED THE NONCONDUCTIVE MATERIAL IN THE COILS WAS CRACKED & WAS BEGINNING TO LIQUEFY; THIS RESULTED IN MISDIRECTION OF THE HIGH VOLTAGE SPARK. THE MAGNETOS HAD APRX 2316 HRS IN SVC. ACCORDING TO AD 73-07-04, THE COILS IN THE MAGNETOS OF THIS ACFT SHOULD HAVE BEEN REPLACED AFTER ACCUMULATING APRX 2000 HRS OF OPN. THE ACFT HAD FLOWN 11 HRS SINCE THE LAST ANNUAL INSPN.