Voltage regulator location? Need a new alternator?

Re: field terminal, brush and brush holder.
There should be a screw with an insulated washer holding that in place.
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While I was under the hood and tracing lines I was checking connections and such and with just a brief look I found 2 wires that had significant cuts in the insulation, exposing the copper. Could this attribute to the problem?
If the conductors are touching and one of them is powered when the key is in run, then yes. Otherwise no.
IGN to POS, Key in Run - 1.8 V
NEG to VR Mount - 0.003 V
Was this with lights on etc?
There's a big difference in resistance if the 1.5 V drop occured with the lights and other items turned on, or if that was just ignition, field, and gages.
I assume there is no ammeter, but leaving it in the drawing to illustrate something around 5 amps flowing from the battery.
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My suggestion is to track down the resistance locations and fix them,
If the resistance is just in the ignition-run circuit, then using a relay is work around that will address that.
But if the resistance is in either feed then it still will cause voltage drops to everything else.
Voltage drops get worse with more current through the resistance points.

Lets say there is resistance between the battery and the main splice. Then the voltage drop of 1.5 Volts will show measuring between the Battery positive and the alternator R6 wire. The engine is off, so the R6 can be used like an extension of your lead.
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this would narrow down the area with resistance
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Earlier I suggested checking the voltage drop from the alternator when the engine is running.
Still think you should do that to make sure there is no appreciable resistance between the alternator output stud and the rest of the stuff.
When the alternator is working, the alternator output wire (R6) carries the most load. It carries current to run the car plus whatever the battery wants for recharging.
The connector at the firewall is particularly vulnerable to overheating because its not made to carry high currents for long periods of time.

With the engine running the alternator is the highes voltage source of power. So use that as the main reference and measuer drop from there to battery and there to ignition field etc. Since your car has a voltmeter added to the fuse box, you can look at that too and see if there is a noticible difference in voltage to ground.
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As the battery gets recharged, the current through those lines decreases and the voltage difference will decrease.
IF the ammeter is still hooked up, it will show you how much current is flowing in that line.

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