I think you are on the right track. When the connector shell is broken the wires can chafe and rub, eventually wearing through and grounding out, this causes loss of the basic timing signal and engine will stop or fail to start, also tach will plunge to zero.

I had this happen and purchased a rebuilt distributor from a local independent shop. Easy to install then reset timing with a light. Before removing the distributor you can mark it's position so that you can put it back at the same setting and at least the timing will be fairly close. You may be able to make a temporary repair by insulating the chafed wire where it enters the distributor.

There is much info on this in the FAQ section. I believe some Bricksters have installed the new hall sensor into the distributor themselves.