Hmmm ... Fig 2 applies except that....
the common post for power is on the starter rather than the alternater as the figure shows. I have a battery cable from the switch and a #8 wire from the alternater on the B post of the starter. Somebody described that earlier in the thread and it was helpful because it seems that all the rudimentary diagrams that I have seen simply show a positive wire from the alternater directly to the + post of the battery, which, of course, I could never relate to on my boat.
Anyway, we have had that discussion regarding the 1-2-B switch vs the switch that I bought which is 1-C where both banks are 'on' and isolated in the 1 position and both banks are 'on' and combined in the C position. BTW, after having this switch in my possession for at least 2 years, I finally installed it!

. In any case, I also bought the ACR and am about to install it. Regardless of the switch, I think you are saying that it works better to run the AO to the power post on the house bank. The instructions for the Blue Seas ACR indicate #6 cable and an in-line fuse between the ACR and each battery. It also indicates an in-line fuse between the ground cable and the negative buss on the DP. That's 3 fuses ... is this over-kill? I couldn't find a recommendation for the specific fuse size but it seemed to indicate 5 to 15 amps, I believe, based on the recommendation for the ground and that seems like quite a range. There is also an optional connection for a starter isolator (to protect sensitive electronics) with an unspecified wire size leading to the start wire (from the button started). I am assuming that the wire could be the same size as the start wire which is #8, I believe, and that a small ring connection could be used to attach it to the S term on the starter. The connection at the ACR is a spade, not a post like the 2 battery connections. An in-line fuse is also indicated with a range from 1 to 10 amps ... again, a pretty big range it seems.
My last acquisition is a Xantrex ProLink Monitor and I haven't even studied that diagram yet!
BTW, I did clean the S term and the burned out area was the end of the starter, not the solenoid. Anyway, I tried to pick -up the new starter today, but the Parkway was clogged either by flooding or an accident or both, so I had to give up and go back home ... what a waste of time and there was no other way to get around it easily. We have had nothing but rain for June and July so far, and this is the first year in over 150 that there has not been a single day making it to 90 d (I think using NYC as the location). It has been a very cool and wet summer! :cry: