...... and the mystery deepens!?!?
For that Reed switch to have any function at all, both the upper contact and lower contact must have continuity to the coil/battery system so that when the points close current is sent to the spark plug. Perhaps the Reed switch is supposed to rely on its mounting to the engine as being one of its continuity contacts through the system, rather than the original snipped off wire, but perhaps paint, or other circumstances may be making that connection less than adequate to its purposes?!?!
On another note, I question why there would be need of a Reed switch on an engine that was being fired by a Hall Sensor, thus it seems incongruent to me that the snipped off red lead (if that is in fact what it is) had anything to do with connecting the Reed switch to a Hall Sensor.