After a fire.....

I've been looking for the ammeter/alt/headlight/fuse intersection but never found it. Maybe now that all the insulation is gone, I'll see it.
If all the cable wrap is removed, you can follow any of surviving wires to it. Most of us never have to dig in that deep.
Str12's suggestion is probably the best. M&H stuff is pretty good and getting the charred stuff out of the car will go a long way toward disappating the odors. Once all the burned material is out, look into whether an ionizer will speed the process of removing the smell. Sometimes those are put in a house after a smokey fire. So maybe it applies to cars as well.

the ignition would have to be on for this to allow current flow/fire?
No. The alternator feed is always hot. With everything off there is still a connection to the battery positive. Using the pressure analogy, its like have 125 psi in all the lines.

If you don't mind, lets use the diagram above. But if its not as clear we can go to the other one.
All of these wires are at battery voltage. Lets call it 12.8V
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There's no current flowing.
The 12.8 Volts is like having 128 psi in the water pipes in your house or air supply in a shop with all the valves shut.

Current is like the flow of the water or air if one valve is opened, say an air wrench running, or sink faucet opened.
That's the way it should work.
But if the valve is broken off or the piping cut, the entire reserve tank is going to empty out.

The wiring closest to alternator is not burned, so I'm assuming ign needs to be on.
Clearly the ignition was off in your case. The burning is not caused by the current alone. Its caused by the current flowing through a resistance.

The alternator is not burned, but there could be a good short inside. If not, then there must have been a short in the wire.
The burned cable shows us that electricity passed through there and it met a lot of resistance at that location. Perhaps the short was right there.

I never knew that while running, there are times when only alternator current is energizing everything. I always see the ammeter ga. slightly to the right of center.
You're not the first. At one time me too. And rest assured many others too. The alternator is the higher voltage source, so electricity always flows from the high voltage to a lower voltage.
You can use the pressure analogy here too picture the flow from a pump that normally produces at higher pressure than is in a reserve tank.