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I disconnected the passenger side lead from the cap and started to remove the spark plug as the wire nut wouldn't loosen from the spark plug. While rotating, the wrench contacted the passenger valve cover and arched repeatedly.

WTF? How?

No, they don't have capacitance. I'm going with you have a short somewhere, were making contact, and that was the cause of your arc. Was your wrench anywhere close to any of the wiring on the passenger side regulator/relay/solenoid harness spaghetti?

Without being there to see exactly what happened, we can only guess at possible reasons for your experience.

It was obviously getting high voltage from the coil some how.

Possibly the ignition was still on and the coil was energised because the points were shut, if you then bring the HT lead close to an earth you can get arcing.
These engine tend to stop in the SAME place every time - friction being higher in that particular place compared to anywhere else on the crank rotation. If your engine tends to stop with the points closed, then if you leave the ignition on for any length of time after the engine has stopped you run the risk of burning out your HT coil, Had that on a friends Haf - wouldn't start when we tried to leave - Coil was VERY hot.
IF the ignition switch was off, maybe it needs cleaning as it might still have been making contact - had that on several switches which were apparently off, but internals hadan't actually moved!
The other possibility is it was just energy stored in the condenser which is across the points. If that's where the energy came from, then is should disappear very quickly as it doesn't store very much.

Do you have a battery cut off switch fitted? If not, they are a good idea as you can disconnect the battery every time you leave the vehicle or work on it.

John

I know this seems crazy, and it makes no sense, but the wire was removed from the cap. It was wire and spark plug only. It arched, and I have no idea how.

Maybe the valve cover is some how insulated from ground, and touching a positive wire? As the plug was coming out, it grounded through the block as my wrench touched the valve cover. Sparks!

audiocontr wrote:I know this seems crazy, and it makes no sense, but the wire was removed from the cap. It was wire and spark plug only. It arched, and I have no idea how.

Maybe the valve cover is some how insulated from ground, and touching a positive wire? As the plug was coming out, it grounded through the block as my wrench touched the valve cover. Sparks!

Yep, that's how I understood your initial post. Could be touching pos somewhere, but you'd definitely have some other issues then. Possibility that you have the D+ somehow contacting something under the shroud? Problem of course is that you'd be seeing magic smoke too.

Valve cover has a gasket, but the top nut on the cover would ground it.

Gotta be a loose wire somewhere.

These little suckers are entertaining, aren't they? (as I go back to figure out and grumble more about the oil leak from the oil filler tube gasket....sigh).

If the wire is completely disconnected from the Haflinger and is only connected to you and the sparks jump to to the haflinger then the answer is:-

Static electricity!!!

You need to stop wearing Nylon underwear!

John