1966 loss of engine power

The clue is staring you in the face. Overheated ignition switch contacts are real common on newer cars because they are made so cheaply, but on older cars overheated terminals are more common. What you smelled was the plastic connector body melting from the heat. The best repair for a classic car is a new ignition switch and wiring harness, but since the switch might be hard to find, use sandpaper to shine up the terminals, then, if you don't mind butchering the original connector, cut out the overheated terminal(s) and cut away the melted plastic that held them in. You will also find those overheated wires are very hard and don't bend easily for about a four inch section. Solder won't stick to that hardened wire, and if you just crimp a new terminal to it, the normally soft copper wire won't bend to conform to the new terminal. That will reduce the contact area and promote overheating of the new terminal.

Instead, cut off the hardened section of wire, splice in a new section of the same diameter, use heat-shrink tubing to seal the splice, then crimp on the appropriate terminal that will fit the terminal on the ignition switch. Also solder the terminals to the new wire to insure a good electrical connection. Plug the connector back into the switch, then plug the new wire(s) in individually to their terminals.