Ballast resitor

The ballast resistor is there to limit current flow through the coil so it won't over heat and die. When using an MSD box the ballast is no longer hooked to the coil. MSD instructions have you hook the wire from the ballast to the small red wire from the MSD that turns the MSD boc on and off. Having the Ballast there or not doesn't make a difference to how the MSD works (either there is enough voltage to turn it on or there isn't) but it's not needed and is just one more place for somthing to fail so I would bypass it as you did.

You indicate you are using a point distributor to trigger the MSD and that is fine. The condensor in the distributor is there to prevent arcing across the points as they open when the relatively high current from the coil to ground is flowing. In your application the current flow is very low and there is no arcing danger so the condensor is not required. That is just another place where something could fail and cause issues. I would recomend that you remove the condensor.

Sounds like you have two issues going on. I would suspect that you have a temeprature related high voltage break down in the coil that is causing the engine to die. Since the miss fire stays with cylinder #1 as you swap wires around I would check the plug and look at the inside of the cap for signs of tracking. But with the engining slowly dieing having a plug fowl is not out of the question.

If it doesn't turn out to be a cap or plug issue don't discount something mechanical with the bad cylinder. Bad lifter, bent push rod, broken valve spring, etc.