Converting my XT500 project to 12v, fitted a 12v Reg / Rec finding that I lose spark if I ground the Reg / Rec.
Magneto is a simple design with 2 coils, one for ignition and other is a shared charging / lighting coil, all coils use a common engine ground.
Bike is a early series with points ignition.

Sussed it, last thing I would have expected but sorted.

It would be nice for those of us that bothered to read your post to know how you fixed it and not just that you fixed it.

Yamaha use a steel band behind the coil plate to hold the wires in place. Mine had the lighting and ignition wires crossed over so with 40 years of heat and pressure the insulation flattened out enough that they started to interact with each other.
Once the lighting coil is grounded out via the regulator it also grounded the ignition coil.
Not a easy one to find