Could be the "permanently lubricated" needle bearing in the generator head has seized and spun. When it fails it lets the armature rub on the field poles causing drag/sparking.
To inspect, remove the thru bolts holding the generator head together then carefully pull off the end bell (watch for the pair brushes that will pop free as the end bell comes off). The bearing is pressed into the plastic end bell. Unfortunately when it fails it usually destroys the end bell.
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Today's Featured Article - An Old-Time Tractor Demonstration - by Kim Pratt. Sam was born in rural Kansas in 1926. His dad was a hard-working farmer and the children worked hard everyday to help ends meet. In the rural area he grew up in, the highlight of the week was Saturday when many people took a break from their work to go to town. It was on one such Saturday in the early 1940's when Sam was 16 years old that he ended up in Dennison, Kansas to watch a demonstration of a new tractor being put on by a local dealer. It was an Allis-Chalmers tractor dealership,
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