Is this happening just when you just turn the ignition ON or do you mean it happens when you turn further to the Start (crank) position??????????? Does it crank over when youre in the Start (crank) position??? (is the starter okay???)
As far as the ignition On/Off switching, theres obviously gotta be input voltage at the switches BAT input terminal, but over on the IGN output terminal its hot ONLY when ON cuz it feeds hot battery voltage to the coil when ON.
NOTE Neither of those switches Ignition terminals (BAT input or IGN output) should go dead when switched to ON (regardless if points open or closed), theres still hot battery voltage on the coils input (NOT to distributor) terminal and its ONLY the coils output (to distributor) that goes to zero volts when points closed as all the voltage should be dropped across the coil since with the points closed that point (coils output) effectively becomes ground via closed points to ground.
First thing I would do is remove, clean n wire brush n reatach each n every battery n starter n solenoid n starter n ground cable n connection as a bad connection or cable may be the problem.
If theres any dead short to ground as you mentioned, any wire from the battery voltage source to that dead ground short would act as a fuze n burn open. However, a resistive short may limit current so the wire wouldnt burn up although it may get hot if too much current flows through it......
Im NOT familair with that tractors wiring but some similar switches may have ballast by pass terminals or grounding terminals for other reasons SOOOOOO are you sure the switch is wired correct???
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