Dennis,
I had the same problem. You need a relay kit, but you also need to rebuild or replace your ignition switch. Follow the instructions here:
http://www.panteraplace.com/page125.htm
Here's a pic of my switch and why your wires got so hot and began to melt the insulation. None of these contacts should be black. They should all be bright copper. It's not necessary to have the contacts re-plated as Mike states in the link above. They can be polished back to like-new condition.
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