The Regulator supply wire should be blue, same supply as the blue out of the bulkhead. In your drawing, it is labeled "green". But the green on an isolated field alternator goes back to the regulator, which controls the field strength.
My guess is that if the regulator is actually hooked up backwards, it is grounding the the supply line, and thus the MSD has no supply.
I'm guessing that if you disconnect either of the alternator brushes, it will fire right up.
OOps,
Mattax's drawing shows exactly what I'm talking about.