The 650 reg/rec should have a connection between the white and black wires (the black with the tip of the arrow drawn on it, as shown on your 650 pix) as 0 ohms. Then, if you connect 0 volts to the wire you colored in as green (that's the GROUND), and also apply 14.0-16.0 volts to the black wire (3rd from the top in your pix), the white-black circuit mentioned above should open, which will result in either an open circuit or (if a resistor is used inside) a resistance of 3-10 ohms (I don't know exactly which resistor value is used in the 650, sorry...). This action will tell you that the regulator portion of the reg/rec is working OK.
Now comes the harder part: disconnect all the wires and check the rectifier in the Reg/rec. If one or more of those diodes inside is shorted, this can create a short to ground. To check it:
1. connect the RED lead of your ohmmeter to the terminal you painted GREEN. Then, connect the BLACK meter lead to each of those YELLOW wires, in turn, to see if you get a reading. It should show some resistance, not an open circuit (if you have a DIODE CHECK meter setting, use that: if you have a conventional meter, use the lowest R scale). Now, reverse the meter leads (BLACK to the green-painted wire) and test again: all circuits should act like an open circuit.
2. Check the other half of the bridge: connect the RED meter lead to the BLACK reg/rec terminal (3rd from the top in the pix), and test each YELLOW wire with the BLACK meter lead. All should show open circuits. Reverse the meter lead connections and repeat: all should act like diodes, with some resistance showing.
If any of the above tests fail, the reg/rec is toast.
The alternator: check yellow-to-yellow, all 3 combinations. All should show a low ohms reading, nearly a short, regardless of meter RED or BLACK leads. Likewise, the BLACK and WHITE wire from the alternator should show a low-resistance reading. Connect one meter lead to the case of the alternator (either lead is fine) and check between each of the wires and the case. There should be an open circuit, infinite resistance. If you get a reading here, the insulation on the stator of the alternator is damaged somewhere and it has shorted itself out.
That's about all there is to these systems: pretty simple units...