I am trying to make sense of the circuit.
If the magneto or alternator was basically fixed magnets on the shaft and fixed stator coil, then the output voltage swing would be huge as the motor speed changes.
The "regulator" is a dinky little thing, so it cannot possible regulate this voltage by absorbing the extra power. That means there must be some other regulation process happening, and the "regulator" is designed to absorb transient spikes, say, when you switch the headlights off.
So my guess is that there is a magneto that provides enough power for the ignition control module via the red wire, and it in turn is controlling an alternator rotor current via the red.white wire to regulate the alternator output (yellow wire). Because the is no battery or capacitance in this circuit, any sudden drop in load will cause a big voltage spike, and the $2 worth of back to back zeners in the $70 regulator module clamp the spike. Lets say the headlight is using 4A of current and you turn it off. Then the regulator module has to momentarily absorb that 4A of current until the energy in stray inductances are dissipated the ignition control module winds down the alternator output down a little. If these zeners are underrated, or if a wiring fault (like a bad earth on the headlights) causes extra transient spikes, then the regulator blows, which can in turn kill the fan, and along with it, the $0.50 full wave rectifier in the "DC Converter" - probably worth at least $70 again - might die in sympathy.
If my guesses are right, then I assume that you are not worried by the headlight blowing - which it would if the voltage wasn't being regulated by the ignition control.
So you could take the regulator, attach it to a power supply via a 1K resistor, and determine the zener volts. Then if you wanted to you could get some industrial strength zeners and make your own module. Also you could obviously take the "DC Converter" and replace it with a rectifier + LDO regulator module that would eliminate any chance of the fan being burnt out by voltage spikes.
But I return to why the regulator is blowing. There just shouldn't be lots of transients, and so something is causing this. A wiring fault, or I have seen a report from someone saying that water in the alternator housing was somehow causing transient spikes blowing the "regulator". Don't know how that works, but we don't know what is actually in the magneto+alternator housing.
One senario is that the rotor is connected via slip rings and carbon brushes. A drop of water could push the brush away from the slip ring breaking the rotor current. So if water is splashing around and can get to the slip rings, then you may start getting more transients then the "regulator" can thermally cope with.
All speculation of course.
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Richard.