The points are just a simple switch that open and close ..turn on and off.. the ignition coil circuit rapidly. Inside the coil the primary circuit that is connected to the two terminal posts on the coil which is an ..electromagnet coil.. is one continuous long insulated wire going around and around. So when you have power to the positive terminal and nothing connected to the negative terminal there is power on both terminals because as I said it is one continuous wire. That is what is making the terminal on the side of the distributor show it has power by the test light. When the points close and are contacting properly you ..ground out.. that side of the coil which makes the light go out. Because the negative battery post has a cable connecting it to the chassis of the tractor and that is where the test light probe is and the distributor base mounts to the engine which is mounted to the tractor chassis. As the points are closed magnetism builds in the primary electromagnet of the coil. That coil is right next to the ..secondary coil.. inside the coil so the primary magnetic field is crossing over into the secondary coil. The secondary winding connects to where the spark output of the coil is. Now the points are pushed open and the primary electromagnet instantly looses its magnetic field. The electrons in the secondary field that where being highly excited suddenly want to find some place to discharge to so they find the exit of the coil by way of the ..high tension.. terminal or socket where the coil spark wire to the distributor cap connects. There are a few more parts to it like the condenser which is sort of a buffer to some of the electrons that come out of the coil during the discharge of the points and helps the contacts surfaces of the point last longer. Well there may be a few technical inaccuracies in that explanation but close enough. I will attach some info on ignition systems by the International Harvester company. The first 10 pages explain what I just told you in proper detail in what I feel is very simple terminology. BTW the name ..points.. is kind of a slang term that has been use for years. If you looked at my example set of points I linked the proper name is ..contact set.. so the ..point.. of contact somehow turned into points. Another thing you asked how to tell when points need replaced I sort of mentioned why in my lengthy post at the point where I mention the example points. Put another way if the round contact surfaces have an extreme electrical arc burned appearance or pitting they should be replaced just so you know you have a good working part of the ignition system that is performing the task of giving the motor strong and consistent spark. Another rough comparison for replacement is the contacts start out somewhere around the thickness of a dime to a penny. If either contact is wore down to half the thickness of a dime this is the point when the reliability of the points really goes down hill fast. If you replace them I looked up the proper spec of the point gap and for your tractor it is 0.20 inches, that is measured when the lobe on the cam in the distributor is opening the points the farthest it can. The info I attached also has some more info on good and bad point condition. One last thing, I think I did not specify what you were supposed to block off when you pulled the intake hose off the carb. The opening on the carb was supposed to be completely held shut by your hand over it. Then the engine turned over to check for a good suction. Also this should pull a fair amount of gas in the carb through the fuel circuits. So if gas drips out of the carb you know gas is available through at least some of the carb fuel circuits to mix into the intake air stream. Another thing while you have that hose off operate the choke and make sure it fully closes when you pull the knob. In the attached info just click the lower line that says HTML file, that will open the whole document. The others are just individual pages. Good luck.
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Today's Featured Article - Restoration Story: Fordson Major - by Anthony West. George bought his Fordson Major from a an implement sale about 18 years ago for £200.00 (UK). There is no known history regarding its origins or what service it had done, but the following work was undertaken alone to bring it up to show standard. From the engine number, it was found that this Major was produced late 1946. It was almost complete but had various parts that would definitely need replacing.
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