Kind of basic, but have you tried it without the kill switch connected? The other thing is that there is some cracking in your insulation on the coil wire that could allow arcing on the cam cover. The ground between the coil, frame, and engine needs to be solid. If you can trace the wires all the way to the stator, that would be useful to be sure about the color coding. The black with red should go to one of the stator coils, with the other end going to ground, and the blue with white usually goes to the pick-up sensor outside the flywheel. You mentioned the flywheel might be the wrong one. With the Chinese stators, the flywheel usually has bean-shaped holes on front. Post a pic.