In article ,
says...
What I don't get is the last wire and what its purpose is .I've read that
its used to possibly run a light on the dashboard

The third wire connects to the circuit node in the regulator
where it gets current to power itself. The regulator has an
internal diode trio that will derive operating current from
the alternator windings, but this only happens once the
alternator is up to speed. A common problem with 3-wire
alternators hooked up as a single wire is that they don't
start charging until you rev the engine up, usually to a
couple thousand RPM. You can buy "low turn-on" regulator
packs that come on at lower speed, but do not eliminate the
problem entirely. The third wire connects to the ignition
switch, optionally through a light bulb, so that the regulator
is powered at all times when the key is on. The bulb will
light until the alternator is supplying enough voltage to
power itself.

I've been down this road researching an alternator conversion
for an old tractor. The best tech information I found was at:
http://mightymo.org/Proj_OneWire.html
Also useful was:
http://www.madelectrical.com/electri...hreewire.shtml
Of course this site tends to try to sell you their products.

As for the idea of remotely sensing battery ground;
While this is technically feasible, the ground cable is usually
much heavier than the charging wire, since it occaisionally carries
hundreds of amperes of starting current, so under normal running/
charging conditions it is a pretty insignificant voltage drop.