Coil and other electrical stuff

My son is having trouble getting his 260z to run smoothly. The engine surges when it runs and voltage at the coil goes from +12 to -12 (hence the surging, I imagine). All the wiring is connected properly. If he runs another wire from the coil directly to the battery, the surging stops and the engine runs fine but he's unable turn the car off until he disconnects that wire from the battery.

What's the problem here?

And while we're at it, beneath the coil on the fender is a rectangular, tan, ceramic device about three inches long and maybe a half inch square with a spring in it and three electrical connections on the outside. What is it and what does it do? We know the wires there are attached correctly, but we have no idea what it does.

Thanks Dennis

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