Alright mate, welcome to the forum.
I too have recently joined the YOC Forum. One of the reasons for joining was the fact my son had running issues with his sr125 (a single cylinder, distant relative to your virago). Anyway he was experiencing the same problems as yourself.
If you know the wire is arcing make sure you tape it up properly. Get a multi meter and fire up the engine, put the multimeter across the battery terminals and you should get a reading of about 14.5v. This will tell you, a/ The genny is charging and b/ the rec/reg is doing its job. Next up if you have access to a strobe light connect that up and removing the access plug with the engine on tickover you will see the timing marks lining up, rev the engine to about 5k and you should see the advance mark coming in to line up with the static mark. This is a lot easier that it reads.
Turned out my boys bikes' CDI unit was failing and unfortunately the only way to test these is by replacement. If you know anyone with a virago, it is a 5 min job to change over to test.