Ok, here is where I am now.
I have followed the diagram above to the letter except for the resistance wire from 4 on the regulator to the accessory pole on ignition switch.
If I have the sense wire (3) on current backs up into the system and keeps the jeep running and lights up the tail lights. That is, when the jeep is running, it stays running if wire 3 is on battery positive, and its a brand new regulator. The good news is that the alternator charges.
If I take wire 3 off, there is no charging, but the ignition switch turns the vehicle off and the brake lights are not on.
Suggestions?
I have an indicator light added to a stray hole on the jeep's dashboard hooked to ignition through a fuse box. That is power goes from ignition switch to a fuse box, through a fuse, to the light, to the 4 post on the regulator.
The charging light goes out if the sense wire (3) is connected to battery positive and the system charges. If the Sense wire (3) is off then the charging light is on and there is no charging.
The tail lights do not light up with the sense wire (3) on or off if the jeep is not running. They come on when the alternator is charging and stay on if the sense wire is connected to battyer positive.
I know the system is charging because the ammeter reads in the positive and the battery voltage increases.
I think I have anticipated all questions, other than, what am I doin rong???
Since the system is so simple, I am thinking maybe its the alternator and some how current's backing up through it, but I am not sure as I don't know the whole thing backwards and forwards.