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Sounds like it may just need cleaned/degreased really well and adjusted properly. If it works cold and not hot, I would lean toward it being a grime related issue or an adjustment problem.

Are you sure you're unplugging the starter lockout switch. If you just unplug it, you'll NEVER be able to start the gen, hot or cold. It is a normally closed switch that opens at engine speed via a flywheel affect, so just unplugging it from the circuit will disable the crank relay entirely.

Nice fix. That's been a problem for several members on the board. Someone a while back did almost the exact thing you just posted. Basically, the spring arms are thin and flimsy to say the least. Improper adjustment before you got the set must have bent the springs away. Setting the gap...