As mentioned above, BEWARE THE GT1 KILL BUTTON!.
The black wire is grounded to the frame via the metal mount to the handlebars.
Mix up polarity and your bike won't run without keeping the kill button pushed in.
"Standard Procedure" says to ground the black wire with it's eyelet to the frame, and then run the red wire all the way to down to the motors White Main Magneto Wire.
Sure it works, but you don't need to do it that way.
I have yet to put the the raw unregulated AC from the magneto to use so I clip off the connector and cap it off.
You can kill the motor by simply shorting out the Blue ignition wire.
That being the case you only need the motors blue and black wires up to the CDI ignition module, and then wire your kill button to it.
I like a clean look and just splicing the stock electrical systems wiring is in a word, ugly.
What I do is add a little box to the CDI unit and replace all the wiring with heavy duty double shielded 18 gauge wire and connectors, and then since I had room in the little hobby box I add an ignition keylock.
Radio Shack has little black plastic hobby boxes you can cut down for about $7.
For the switch you can use the "Keyboard Lock" keyswitch for an old "IBM Compatible" PC case, but to buy a single good keyswitch small enough if you can is about $25.
The wire, well I all I could find I liked was 100' spool at 50 cents a foot.
The crimp on connectors are cheap though, most any hardware store has them, and then just a little shrink wrap tube for each end to clean up the connections.
I just went ahead and bought enough parts in bulk to make 50 of them, but I can part with a dozen or so "bag of parts" delivered for $17.95
if you want.
All the rest I am keeping for my own builds ;-}