I looked at two trucks over the weekend that had the larger wire on the lower post
Hmmmm- - - - -I guess it's possible those generators might have had the internal wiring swapped at some time in the past. To be absolutely sure, look into the end frame on your generator, and trace the wire from the insulated brush to the housing terminal. That one will be the ARM. connection.
The octane selector needs to be centered before you set the initial timing with the clamp band, then it's used to do minor tweaking of timing for different grades of gasoline, etc.
Jerry