I managed to access and open up the box in the basement and I am 98%
sure that it is connecting the switch and the light fixture to the
main.

The connections appear to be as follows:

Coming in from breaker panel - one pair - Black and white

Black from main connects to black on switch

White from main connects to white in light fixture

White from switch connects to black in light fixture

red from switch connects to red in light fixture.

I still have not figured out why the red sparked when it touched the
metal switch-box, I guess that the whole switch must have been live
from the black feed.

So, how do I simplify this so that I just have a simple on/off switch?