The black barrel hickey a couple inches up from your test light probe is the diode.
So now reverse your polarities. (i.e. apply the 12 volts to the ring terminal and put the test light probe into the key plug "R". If it still lights, your diode is shorted.
You can buy the assembly, Google "959-3689 diode assembly" for about 20 bucks
https://www.google.com/search?q=959-...t=gws-wiz-serp
or
you can buy a diode for a couple bucks and replace it yourself. I understand a 1N5400 diode is a good replacement.
https://www.ebay.com/sch/i.html?_fro...A&_dcat=260820
If you replace it yourself, pay attention to the line at one end of the diode. That determines polarity and you must put it in the same way as the old one.
(i.e. end with line towards the carb.)