A picture of the alternator connections would help, but the wiring sounds correct. The unused hole marked GRND is probably just a threaded hole for a ground wire, which is a good idea to have.
The dark wires on FLD and at the regulator should be Blue and they join together in the harness, they should have 12 volts switched by the ignition.
The green wire from the regulator should indeed go to the field ground on the alternator, which should not be grounded to the case. You can test that with an OHM meter, remove both field wires and meeter between them and the case, you should see infinet or open on the meter.
Again, the wiring sounds fine it is just the type of connectors you are describing that sound a bit off, a picture would prove them.
The melted battery connection might have just been a loose connection, or it could have been caused by a bad diode or reversed booster cable connection. It should not have been caused by shorting a gauge lead.

Here is a simple video that will show the connections and a simple way to prove that the alternator is working and test the connections. Make sure you only do the test momentarily, and I use the regulator body for ground to prove that it is grounded as well. The regulator ground is important and should really have an extra wire to ground it and the alternator together.
http://youtu.be/ZzBbpTtVF-4

In the bottom pic, the right side alt and reg can be used together. Same with the left pair. But you cannot mix from side to side.
I cannot see the actual green wire terminal in your pic, but it appears that your alternator is a grounded field type and WON'T work with the wiring or regulator in your car.
Best way to be sure is to do the check I mentioned and meeter between the case and the two field terminals. Any connection to ground here is the wrong type for the wiring you are describing.

With the battery disconnected, I get continuity between the case and the dark wire which normally goes to the FLD terminal. No continuity between the two, or between the green wire and the case.

With the batter connected and ignition on, I get continuity between the two wires, and between both wires and the case.

In the bottom pic, the right side alt and reg can be used together. Same with the left pair. But you cannot mix from side to side.
I cannot see the actual green wire terminal in your pic, but it appears that your alternator is a grounded field type and WON'T work with the wiring or regulator in your car.
Best way to be sure is to do the check I mentioned and meeter between the case and the two field terminals. Any connection to ground here is the wrong type for the wiring you are describing.

OK, now measure between the terminals and the case, no continuity between either terminal and the case, but the two terminals have continuity together.

Your all good then!
The ignition feed (blue) powers the field coil in the alt. The green wire provides a variable ground through the regulator for the field coil. That's why it's important to have a good ground on the reg. That variable ground the reg provides controls the output voltage of the alt. The blue wire at the reg just tells the reg. what voltage is coming out of the alt. So that part of your wiring is all good.
Now you just need to make sure the rest of the wiring and the alt. itself is good. As you say you have a burnt battery terminal on the alternator and it might have a bad bearing or two as it's seized.
You can check for a shorted diode by removing the battery wire from the alt. and checking continuity to the case (ground) You should see an open connection. Spinning it by hand should confirm a bad bearing.

That's WAY too much voltage drop! Should be a few tenths of a volt at most!

BC