It is normal for the kill wire in a points ignition system to have a peak voltage of hundreds (say 150-300 V) which is enough to produce a visible spark, though not a very long one - certainly not 2 mm.
So, I am back to not knowing what you are unhappy about. With the kill wire isolated (i.e. not shorting to earth, or anywhere near earth) does the magneto generate a spark from the plug-wire to ground? (Don't use a spark plug, in case it is defective.) If it doesn't, you have an ignition fault, but most likely an ordinary one. Most such faults are because the breaker points aren't correctly gapped or the capacitor is faulty. The remaining few are just about certain to be shorts to ground or defective coils.
