Headlight switch , is it the cause? or the curse?

ordered the Packard 56, 18g since that what I see on the wiring diagram from the shop manual.
Also ordered a new dimmer switch (foot), along with a new headlight switch.

Having trouble using this 12v lamp tester, connecting to the ground doesnt really give me enough room. and the body of the car doesn't seem to provide any ground? is that right?

Also, if I disconnect at the bulkhead (X Y Z) , the car won't start, no power at all. Is that right? Also connecting bulkhead, but removing headlight switch - car won't start no power.

I hooked up the old headlight switch again, pulled it out so it is on, no lights, but I do see volts at the dimmer wire, and also on the back of the bulkhead. After a few minutes, I went to remove the Headlight switch, IT WAS BURNING HOT on the rheostat. ????

The dimmer plug looks a little melty too. hummm......

I was also able to see under the dash to the Alternator indicator, and the wire has been cut (red). Cant see where it should be running from. Does that go through the bulkhead as well?

so many questions, all I want is the headlights to work so I can drive at night. Calgon take me awayyy