Sounds like you might have the Mercury Switch Box ignition system? To be 100% sure, if you can post a picture, that will give us a better idea.
I'm making the assumption that you have the Switch Box ignition system:
No other checks for the key switch if you've already disconnected the Black/Yellow wire at the Switch Box. The ignition system is self energizing and doesn't need a battery to operate. You can disconnect the battery and pull start the motor and it will run fine (if you're getting spark, fuel etc).
Make sure the magnets under the inner circumference of the flywheel are all there and none missing or cracked in half etc. There should be 6 magnets.
If all the magnets are intact, check for AC voltage output of the stator. Set your meter for at least 200 volts AC and measure across the White/Green and Green/White stator wires while cranking the motor. You should see something in the neighborhood of about 140VAC or so. You need a DVA adapter to get an accurate reading, but for this instance, all you are looking for is some AC voltage going to the Switch Box. If you have AC voltage going to the Switch Box, but no spark, then most likely the Swicth Box is bad.