I did some more looking and yes the alternator needs to see the load from an incandescent bulb to get the field coil energized. The LED isn't enough to do that. This has been discussed a lot, and for those insistent on using an LED, some have suggested you can run a 50 ohm resistor in parallel with the LED, like this:
View attachment 139376
I set that up on a project board and that didn't work. The LED light wouldn't illuminate. Reading the description closer, it needs to be a
shunt resistor: 50 ohm and 5W. I couldn't find anything that seemed to match that description online, and realized there may be other resistor names like current sense resistor and cement resistor that might be the same thing? I got lost in choices and decided to go for the simple solution. Just use an incandescent bulb. But the bulb wouldn't illuminate using the wire back to the alternator as the ground. Oddly enough, the LED warning light would illuminate. I ran a fresh 12v wire straight from the fuse box, and the incandescent light works with a regular ground but won't illuminate using the alternator ground (with the 3 terminal socket wired according to the initial diagram I first posted).
So to summarize: the alternator works if I swap IGN and L according to the diagram. But the LED dash light stays illuminated when driving. If I put IGN and L in the positions according to the diagram, the alternator doesn't work, and the dash light is always on. Am I missing something simple?