Could you chamfer the flywheel to make a bit more clearance?

I don't remember if that was an option. The flywheel is back on and the engine runs.

I'm just wondering if anyone has seen this before?

Yes, have seen it before, but not on a Tecumseh VH70 flywheel. In a factory, when people get rushed, and they are trying to speed things up, parts can go through with certain steps that were not completed. Chamfering, and de-burring come to mind, I have seen examples of both. I'll bet that somewhere there is a drawing of your flywheel, and it calls out a chamfer on the edge that faces the coil.

But ericwi, this was back in '72 when hippies roamed the earth :)

There was no rushing around back then buy maybe the guy who machined my flywheel was on a rush. :)

My guess is it was a routing problem. You had to be careful back in the day when routing those wires or they could rub through and kill the spark. Ask me now how they route and all I have to share is a dumb look....

I'm going to let it be. The area of rub-through is about 1/2" from where the wires exit the encapsulated coil body. I could only press the wires tight against the body, but that's where they were to begin with.

If a problem arises, I'll know what to do now.

I have seen ignition coils that had the wires taped to the body of the coil/magneto. The engines ran well. RJ