Installing ignition relay

I was thinking I would disconnect my ignition wire from the bulkhead connector, attach that to 87 on the relay, and then run a new blue wire from 86 on the relay to the bulkhead connector, then attach the power and ground. If I do it this way my relay will be next to the bulkhead connector.
You can do exactly that. Take care to mount the relay to reduce weather problems or try to find a weatherproof relay, in any case mount it "pins down, case up"