You should not have gotten more than about 1 volt at the generator armature terminal with the field wire disconnected. Something, possibly internally in the generator, is allowing the field circuit to find a ground. Check the insulator at the "F" stud in the generator to see if it is contacting the housing. The only place you should get a ground for the field circuit is through the regulator points. I would consider 1/8 turn of the regulator adjusting screw to be a HUGE change.
Jerry

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