Harley,
You are about to enter the 400 Hz Zone, where things are not as they appear, or as you THINK they appear. You have already stumbled upon one of the inexplicable differences between 60 Hz control boxes and 400 Hz control boxes. You should remember that this has already driven me CRAZY, so don't be drawn into my psychological whirlpool of confusion. I'll try to explain what's going on with your control box.
You already know, of course, that there are at least 3 slightly different MEPs with many interchangeable parts: MEP-002A (60 Hz), MEP-003A (60 Hz) and MEP-112A (400 Hz). I believe that the control boxes for the 002A and 003A are identical and completely interchangeable. However, the control box for the 112A is slightly different. In addition to the frequency transducer and Hz meter, there is a small WIRING DIFFERENCE that you wouldn't notice unless you suspect that you have a 400 Hz control box, or that you stumble upon during troubleshooting (as you have already done, whether you realize it yet or not).
The key is that you disconnected the starter cutout switch at the Cannon connector by the oil filter, verified all the wiring as OK, and you still had ground at terminal X2 of K3. That's impossible according to the 002A, 003A schematic, right? But it is exactly what can happen in a 112A control box with a short to ground on the back of the AC voltage regulator card! Look at Terminal Block 4, Terminal 3. Do you see 3 wires connected to TB4-3? If so, you have wiring for a 400 Hz control box. The 60 Hz wiring, and probably the SCHEMATIC you are looking at, has only 2 wires on TB4-3.
What's it all mean and how did it get that way? Well, I don't really know, but my guess is that somewhere along the long maintenance and revision road that all these machines have traveled, the 60 Hz and 400 Hz control box designs were merged and differences were reduced to the essential minimums. The essential minimums are the Hz transducer and meter, and (perhaps) the AC voltage regulator card. Unfortunately, the TMs (even through many revisions) never caught up with all this. My guess is that the maintenance folks freely interchanged 60 and 400 Hz parts (except for the Hz transducer and meter) and called it good. Storeman can verify that most of his 60 Hz machines contain 400 Hz AC voltage regulator cards, as do most of my machines, and they all work fine. However, the TMs call out different AC voltage regulator cards for 60 and 400 HZ.
The slight wiring difference between 60 and 400 Hz is shown ONLY ON THE SCHEMATICS you and I use for troubleshooting, which leads us to LOTS OF CONFUSION and has driven me completely CRAZY!
Hope this helps instead of leading to more confusion,
Richard