........What about the diodes between the igniton and the battery? could this be a problem from a bad diode module?
I do not think that it is a diode module, as they are there to prevent feeding back into another circuit that is also communicating to the device being controlled. However,it might be worth checking them. There are 2 diode modules involved with the starter relay (solenoid).
One diode module is feeding the positive side of the relay coil. A signal comes from the brake light circuit and another comes from the CDI module (passing along the neutral gear position signal) and the dual diode module prevents either of those signals from back-feeding into the other, but you must have at least one of these in order to start. You can check the diode module with a continutity tester or Ohmmeter: Take the dual diode module out of the circuit and put the ohmmeter leads across 2 of the terminals on the module; red test lead to the Black/Yellow stripe terminal (brake light on signal) and the black test lead to the Yellow/Blue stripe terminal, the meter should read close to 0 ohms (current will flow). Reverse the test leads on the same 2 terminals and the ohmmeter should read infinite ohms (open circuit, no current flows, digital meter reads OL). To test the other diode in that same module: Repeat the test; red test lead to the Blue/White stripe terminal (CDI ready signal) and the black test lead to the Yellow/Blue stripe terminal, the meter should read close to 0 ohms (current will flow). Reverse the test leads on the same 2 terminals and the ohmmeter should read infinite ohms (open circuit, no current flows, digital meter reads OL).
The other diode module, single diode, 2 pins, is connected to the negative side of the starter relay coil. The negative side of the coil is connected to ground by the ignition switch when you turn the key to 'start' via the Blue/Black stripe wire. Now comes the part that may be confusing, from looking at the wiring diagram: That Blue/Black stripe wire is also connected to a diode which is connected to the ground side of the overheat indicator light (used when you do not have a digi-dash), a temperature sense switch and the digi-dash module (if you have it). I believe the idea here is that they test the overheat indicator when you crank the engine with the key switch by passing the ground connection through the diode. You do not want the grounding of the far side of the diode when the engine actually overheats to start cranking the engine, so the diode blocks current flow in that direction. To test the diode use the same procedure as described before; red test lead to the White/Blue stripe terminal (temp overheat line) and the black test lead to the Blue/Black stripe terminal (grounded to start), the meter should read close to 0 ohms (current will flow). Reverse the test leads on the same 2 terminals and the ohmmeter should read infinite ohms (open circuit, no current flows, digital meter reads OL).
Whew, that was a over-wordy one! I hope that makes a modicum of sense. If you just test the diodes for function with the ohmmeter and they all work, then you do not need to know the why's for the diodes.
Just as an aside you might have a damaged portion of the wire harness grounding loop. That is why I suggested carefully inspecting the pigtail and it's connection into the harness. Damage in there can lead to strange and really hard to find problems. It tends to show up at the pigtail but can also happen internally within the harness with no obvious visual sign. You mentioned smelling smoke, do you know where? I don't envy you, it is really difficult to diagnose when things have been hacked up previously. Good luck!