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It’s possible for the same reason that the spark plug center contact reads infinite resistance to ground – yet it still sparks. You have a broken connection somewhere in the secondary winding, and the spark energy is strong enough to jump that gap in addition to the plug gap.
So, the explanation is pretty simple, in that sense. Have you ever had a resistor plug cap (normally 5K) that reads wide-open, but still sparks at the plug? Same exact situation.
Precisely. You answered your own question.
FYI – It could and likely will continue to run like this for quite some time, but eventually, things will break down far enough that the spark energy is no longer sufficient – or simply fails entirely.