I just checked what you told me and there is +10v from the alternator case to ground. What does this mean? Does it mean the alternator is not grounded correctly? Would this cause the alternator not to charge the battery? Also the only warning lights that turn on when the key is in position II is the upshift light.

Using the Haynes manual, we ran through their procedure to detect a short in the car's electricals. They said: with all accessories disconnected (clock, radio, etc.), connect a test lamp between the negative battery post and negative battery clamp. If the light comes on, there is a short. We simply pulled fuse #1 (radio) and #8 (clock, courtesy light). Our test light did not come on. :)

With the car running, we also checked positive battery terminal to ground (12.3 volts) and positive alternator terminal (also 12.3) to ground. It appears that the alternator Autozone sold me is defective already...

More information to come as we progress!

PS: This is a 1989 245DL

EDIT: Added more voltage information and details about or procedures