It sure looked like battery corrosion to me too. However, that engine has been stored without the battery for 25 years in a climate controlled, low humidity space. The inside of the battery chamber shows no signs of corrosion.
Upon further inspection I noticed crystals/corrosion all along the insulation of that wire, even in areas where it did not touch metal. I don't want to simply replace it with a modern day wire only to have the same problem again, so I am getting some cloth wrapped 20/22awg solid wire to use.
It is probably no big deal, but I just don't like fixing symptoms (replace the wire) without knowing what the real problem is (and will it continue or get worse?).
