Briggs 208cc govenor gear

So I went down to look at the generator. The guy said he was using it briefly and it just wouldn't idle up. They drained the fuel of corse but I was able to start it with what was in the carb bowl. It seemed to idle down but stalled. The govenor seemed to be working so maybe something else. He let it go for 50$, and said it was still outputting power. The throttle butterfly looked good as well as the linkage. I'll mess with it more tonight when I get home. I grabbed it on my lunch break. Any possable ideas for why it wouldn't throttle up? All the springs and linkages look good and seem to move as they should.
 
So I started it up and it basically just gets overloaded by the generator somehow. If I unplug what I think is the voltage regulator it runs fine. If I disconnect one of the wires at the brushes it will also run fine. Unbolting the 3 wires that go to the outlets doesn't get rid of the huge drag on the engine. So I don't think there is an issue with the outlets or control panel. Something in the generator side is apprently putting a huge load on the engine. Does anyone know how to troubleshoot this?

The black looking box is what I unplugged.
 

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@StarTech The had to be giving off an odor that would be unmistakable The burnt electric smell is probably still there if somebody puts their nose close to it. Looks like both the rotor and the field are cooked.
 
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