Still no spark with the wires removed? They must be removed at the coil, not the other end. There is a diode in each wire, so it must be removed from the coil end.
The motor needs to spin at least 250-275rpm to be able to achieve spark.
Did you try new plugs?

I think I have it wrong.

I believe the body of the ignition coil is grounded, the wire with the diode in this picture needs 12V (X8).

I am 90% sure we did not have 12V on the coils, which from the drawing page 2 (not shown) is likely a starter switch issue.

http://forums.pelicanparts.com/uploa...1467675887.jpg

If you apply 12v to X8 you will fry the diodes and possibly the coils.

Unplug the diode wire from both coils.
Turn the engine over and check for spark.

You said the starter wouldn't turn over. That could be a bad ground to the engine block, which would also cause the no-spark. It should be a large cable going from the battery negative, directly to a block mounting bolt. Yours may go to the frame, then to the block.

I build these engines all the time. I have 10 of them in my shop right now.
Again, it could be the plugs. One plug could have been bad for a long time, and the other one decided to crap out now. Most people can't even tell when this motor is hitting on only one cylinder. It will be low on power, but still sound almost the same.

Like I said, I just went through this last week.

The wires that go to the coils are to ground out the coil to shut off the engine.

The positive wire that goes to the magneto goes through the switch to the battery and must be grounded out when the engine is shut off to discharge the mag. There is a diode in this line which makes it pulsed DC.

The other wire goes to the head lights.

You may have a carb solenoid. This needs to have power when the engine is running / starting or it won't start.

Got it...will report back.

Red 88 was closest. Two bad coils. Per his suggestion I suspect it was running on one cylinder and then the second coil crapped out.

Replaced both coils and it fired right up.

Thanks for the help.