I may have worded my last point poorly, it was to confirm that you had continuity on the main cable to battery. Since it was disconnected at alt. and neg cable (only) was off battery you would have to check from alt. end of cable to neg bat terminal to get volts.
Alternately if all was connected, and ignition off then you should be able to measure volts at alt. terminal, but of course this would be battery volts since alt. is not turning.
I guess my concern from reading initial post was whether you had experienced a short to ground at alternator output terminal or was it simply B+ arcing because of poor connection.
It seems you have diagnostics well in hand so we'll wait for your success story to be posted.
