So I got so tied up with a moron that parades around in a 165hp POS 75 C3 (who is proud of it, naming himself Turtle and for some reason 'races' it) that I almost forgot to follow up over here.
This was my Dad's (electrical engineer) theory as to what happened. He speculates that the voltage needs to build up when you're supplying a very small amount of current for it to build up the voltage high enough to jump the spark plug gap. But when there is a dead short (on the header), the voltage cannot build up because it is constantly draining (just on that prong of course) and by the time it fails it has drained the coil which is why it didn't have enough power transfer capability to keep the voltage high enough for the other spark plugs.
To phrase this in a way that would piss Turtle off: The resistance of the air is almost infinite (before it ionizes) while the resistance of the copper core melted to the grounded header is comparatively almost nothing so when the spark plug wire is shorted out, the voltage cannot build up in the coil.
I have to respectfully disagree with the explanation you provided, but I'm speculating the error on your understanding of electronics and inductive circuits, not your dad's actual words to you.
An after-the-fact question. Did the engine restart by just moving the key to START, or did you power off (key to OFF) prior to the restart?
Okay, I guess a second question. I don't recall getting an answer to whether there is/was an external CD box hooked to the distributor.