That wire definitely shows some excess heat. As 76-914 says, make sure you check out why it got hot enough to melt the insulation..
Is there any way your coil could have rotated and shorted either side of the electrical connections to ground? AND, have you been troubleshooting electrical issues with the switch to ON for an extended period of time?
If the points are closed while the key switch is ON, it can cause excessive current thru the points and likewise thru the wires that feed the coil. With the car running, the points have a "duty cycle" where they are open almost as much as they are closed. Make a big difference in current heating up the points and wires.
Looks like you may have dodged an electrical fire that could have cost lots to fix. Maybe think of getting a fuse on the 4 red wires from the battery positive. If you look on the electrical diagram for the battery to the key switch and on to the seat belt relay and coil positive, there is no fuse. Therefore the smallest wire in that circuit becomes the fuse. Search for a raised block fuse thread that I started some years ago for some good info.
Yes, with the key switch to ON, there should be 12 volts there at the "hot" side of fuse #9.
Yes, the last key switch could have cause this, still be sure to check what fuse #9 feeds, both on the "hot" side and the fused side. Fused side feeds tail lights ( stop lights) and the oil pressure sender. Something caused this and you need to make sure the problem is no longer there or you may have to go thru this again. I'm sure you don't want that.
As always, glad to help!
Tom