Hydrogen/natural gas blends fuel is considered one of the ideal alternative fuels for improving the thermal efficiency and reducing carbon emissions of rotary engine. In order to further enhance the combustion and power performance of rotary engine, a new method of the setting of bluff bodies in the cylinder was proposed. The influence of bluff-body settings in the cylinder on the combustion, power performance, and NO generation was numerically studied under different ignition timings. The results indicated that in-cylinder bluff-body settings could influence flame propagation by affecting the turbulent kinetic energy and mixture distribution during the process from the late compression stroke to the combustion stroke. Further, for any fixed bluff-body shape in the cylinder, there is a trade-off relationship between the non-blockage ratio and squish velocity at the cylinder block center section as the ignition timing is progressively advanced or delayed. Consequently, considering the above trade-off relationship, the triangular slotted bluff-body in combination with an ignition timing of 30° CA (BTDC) could be used to achieve the maximum improvement in the combustion and power performance of rotary engine. The peak pressure exhibited a growth of 4.83%, and the indicated mean effective pressure increased by 1.46%.