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Who knows what this is. I found it unplugged. Circled in red.
And yes I noticed the melted wire jacket. The two wires were actually welded together. I peeled them apart and taped them for now. Planning on a starter relay bypass and headlight relay upgrade real soon!
I agree with 72Roadrunner,
It is a capacitor to reduce, not ignition noise, but to reduce the "noise" generated by the opening/closing of the points inside the instrument panel voltage regulator. The old style gauges use +5 volts to operate; the voltage regulator is thermal on/off device (actually a percent cycle timer on time vs off time) or if 100% on is 12 volts and 5 volt output is 5/12 on time to yield 5 volt output required by the gauges. Simple but the replacment devices are far more effective in providing the needed 5 volts. This is just my opinion...
Cheers,
RJ RENTON (Bob)
As I stated elsewhere, if you're using a solid state regulator, the condenser is not required. However, it won't hurt if it doesn't leak electrical current.
Good "point" on the noise filtering. It also prolongs the life of the points.