My request is: Please confirm if you think this damaged connection is the cause, or that it could be either the cause or a symptom. I will need to fix it either way, and then move on from there.
Without seeing the terminal connection, I don't know. My guess is that the wire connection was poor, maybe for mechanical reasons, and then at times of high current flow, it cooked itself good.
If the wire isn't corroding badly you can clean it and crimp on a new ring terminal. looks like that protective ring was molded on? Best you can do is use shrink tubing to proect the crimps, and a seperate insulating ring which Chrysler used on many years.
Is the alternator's output stud tight? If not, you'll have to open the alternator case and tighten it. (Yellow arrow in photo above.)
