Magnetism test determines that the field coil is working. Me, and Drew's (Drewicifer/Drewpy and most of us have all gone though these steps, cause of bad wires. So I am going by your photo, that your bike looks like mine. some where you can set up a signature, that will tell people that you bike is, I think its a 81 400sh. I just posted #5 in this postings, but the extra info that I forgot to cover is added. check it out.
http://www.xs400.com/forum/showthread.php?t=9480
So from Drewcifers post,
Step 1, Magnetism Check, (Done Working)
Step 2, White wire check, To Xpound on that topic, there is two connectors for the white wires. The thing with the resistance check is that the numbers should be the same, no matter what pair of white wires tested. I remember marking on the connector 1,2,3. and then notating those numbers for each pair (1&2, 1&3, 2&3, with the resistances. Then to make sure that the jumper wires were not bad, I did it from the connector to the rectifier. Check for incidental grounding. you should not get a reading of continuity or resistance (ohms) from any of the white wires to a ground. If that's grounding out, that is bad.
Step 3 Rectifier, from the manual Attached. New or old, the test didn't change. I am not going to re-write it, just print it out, it cut out of the on-line manual, and its easy enough. same for VR.
Step 4, since your here, Voltage regulator. (mine was shot, my second one was a combo, that didn't work either, I must of tested something inappropriately, so when Drewpy says don't do that it could ruin something, yea, use the manual. (attached)
Step 5. Visually check the wire. (so if you got everything working to this point, then the visual check should be fine. Your bike should be charging. The visual check, Touchy feely part. by now you have been checking the wires out, you know how they should feel for being a 30 year old bike. So as you feel the wires, if you feel any fray, or the wire gets stiffer, than the previous segment, you have a problem. That is how I discovered my problem. a segment of wire, was really stiff, and as I tested (tugged and pulled) the worse the 3 white wire test got. That is the same spot for all of us. references the photo from Drewcifer/or Drewpys rewire project. There is enough photos of shot wires, Those two where the 2 references for me when I did my project.
So just so everyone knows, no covers were removed in my suggestion, yet. no bolts removed, We are still probing with the multimeter, and feeling with our hands *(my next step would be to pull the chain sprocket cover off, and order some parts (gaskets...) Next step, if the rectifier/voltage regulator are shot, and the replacement fixes it, we are done. In my new link I put in here today, goes a link I put in on how I replaced my voltage regulator. also in my photo albums. Only thing I dont think we covered, Voltage reg is the connector with 3 wires, and the rectifer has 5 wires. just in case. Take care Tobie good luck