tinkerman,
I’m happy to hear that you found the problem.
As for the kill switch, are the wire ends cleaned and tight? If so, the contacts on the inside may be corroded. You can rule it out by replacing the switch wires with a couple pieces of spare wire laying around. If the engine dies when you touch the two wires together, you will know that the switch is bad.
The mercury switch you showed in your picture is actually a vacuum cut-out switch. As fleetwin mentioned, it stops the motor from over-reving if you shear a drive pin on the prop shaft. There is a diaphragm and a spring inside it that will ground out the ignition if it produces enough vacuum from the crankcase. It can be, and often is, bi-passed because they can cause issues.
