Came back to update and for more consultation. I have made the terminals-shortcut check and got a strange read: the tester went crazy and gave a very un-steady read of 12 and up to 18 DC volts, up and down, in a very hyperactive manner. So frenetic that it was very difficult to read because of the speed it run between the volts. Then I connected everything back again and checked on the battery. I got there 5,7 volts on idle and 6,3 on high rpm. In my opinion this is too low for an overhauled dyno, an all-new harness and a new battery that BTW holds up the charge very good (from the external batt. charger). I am searching now after my original old regulator as I want to fix it and install it instead of the digital German one, but until then I am desperate for any new idea / help.
The dynamo should not be giving the readings that you suggest. My first course of action would be to remove the brush cover band and at least check that that the brushes are free in the holders with suitable spring tension and that there are no trapped wires.
I scratched out any muck on the groves of the commutator with a sharp small nail/pin. I replaced the brushes and springs (from memory you have to be careful when ordering the brushes as I think that there are two types of dynamo; a short one 40w and a long one 60w).
If you are careful, get the bike running, take off the strap at the front of the dynamo (looking at the bike nearside). Remove the "bakelite" brush cover (single screw in the middle of the dynamo). Expose the end of the commutator and spray with WD40 (I tried electrical cleaner, but it seemed to leave a deposit that didn't help).
Then do your multimeter tests at the dynamo i.e. checking that you get a steady increase is DC voltage as you increase revs (I can't remember what my dynamo belts out, but it is well over 12V on not too much above idle) . Then check at the battery to ensure that the voltage is steady and greater than 6V.
If this all works fine, I would put in a switch that isolates the battery i.e. you switch it off when you park the bike up.
