The switch is for the lights. The induction coupler is usually just a coil of wire wrapped around the spark plugs wire, it's only purpose is a signal for the tachometer.
You need to clean the points with Emory paper, check all connections and grounds as well. Of you still don't have spark you may need a new condenser.
I have no idea if that is the correct schmatic.
That is a VERY cool bike.