Well - despite my doubts - I think the Cut-Out switch guys are right.
I had another play with it (stop it!! - I know what you are thinking!!) and put my multimeter on continuity across the two wires - nothing - no matter how I positioned the black knob.
So I gave the wire ends a good clean and repeated - still nothing.
I pulled the wires out of their mounting holes and gave the holes a bit of a clean - and put my multimeter across them - nothing.
I then gave the whole mechanism a good spray with electrical contact cleaner/lube and rotated the knob a dozen or so times, and it gradually started to develop a type of "clicking" feel that one would expect of a switch.
Ahhhhhh....
I once again put my multimeter probes into the wire mounting holes and rotated the black knob. This time I was rewarded with a reasonable clicking type sound as the switch operated, and then a nice BEEEEEEEP from my multimeter!!
I was able to repeat that about a dozen times - Rotate Knob Clockwise - BEEEEEEEEP - Rotate Knob Anti-Clockwise - Silence - Clockwise BEEEEP - you get the idea.
I have now put it back together and back onto its mount and if I put my multimeter across that frayed wire hanging out of the "switch" and and earth point on the engine's head - same thing - BEEEEP - No Beep depending on the position of the switch.
So it's definitely a switch!! And despite my reluctance to believe it - I think that means it is almost certainly an after-market ON/Off switch for the engine - I can't really think of any other use a switch might have.
Most of you kinda had it figured out way before me - but Wee-Allis has probably summed it up pretty well.
The owner of the engine at the time grabbed whatever switch he had handy and it just turned out to be a Ring Grip 240 volt rotary switch.
I think we might be able to safely say the mystery is solved.
I really like restoring engines to their "From the Factory" condition - but I think I am going to leave this switch on this one - I guess its part of the engine's history - and quite interesting.
Once again - Thanks guys - once again - a great fount of information
Polybus