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I installed a GM three wire, internally regulated alternator in my '56 with 292. It works great. The funny part that I can't work out is that on initial start up, the generator light will stay on until rpms reach about 2,200 to 2,500 rpms at which point it will go off and stay off unless the rpms drop below 400 rpms or so. It really isn't a problem as I can make it go off by revving the engine once in the morning, but I am wondering about what is going on here. I don't think the alternator is at fault- is it the lamp itself?
You have the large output wire going to the bat +.
You have the red #2 small wire jumped to the bat output lug in the alt.
You have the other small wire on #1 terminal running to a ungrounded bulb and socket, with the other wire leaving the socket going to the key on power of the keyswitch.
one thing to check is the bulb in the dash. it may be that the bulb is to small(it is not letting enough voltage or amperage go to the alt to magnetize the regulator). i have seen this before on trucks that have been converted in the way you have done and when you rev the engine the rpm of the rotor causes enough magnetizem to turn the reg. on(like a one wire alt).