Just because it seems to be at DC ground doesn't mean it's at AC ground. The magneto is a transformer and the physics of a transformer are such that when energized (the magnet on the flywheel passing by the secondary) each turn will have a voltage proportional to the applied voltage and the turns ratio. If any ONE turn violates this rule, the transformer does what It has to/can to bring this single turn voltage back to where it belongs, even if it means sucking up all the energy in the other windings and core and all that.
When you ground the kill switch, you are shorting out at least one turn and probably numerous and as a result, there is no energy left in the mag to fire the plug....the engine quits.
So for a problem, if nothing is obvious then you may have worn the varnish off a turn or two inside the mag. and you have a couple of wires touching amounting to the same thing as stated above. Otherwise you may have a corroded or bad connection between a wire and connector.
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Today's Featured Article - Earthmaster Project Progress Just a little update on my Earthmaster......it's back from the dead! I pulled the head, and soaked the stuck valves with mystery oil overnight, re-installed the head, and bingo, the compression returned. But alas, my carb foiled me again, it would fire a second then flood out. After numerous dead ends for a replacement carb, I went to work fixing mine.I soldered new floats on the float arm, they came from an old motorcycle carb, replaced the packing on the throttle shaft with o-rings, cut new ga
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