Wow! That is really funny. It looks like the braid is no going to the case but going to the end post? Maybe I looked too quick. You are right it is a big capacitor, but it doesn't belong there. Maybe somebody was trying to reduce AM radio noise 20 years ago and took that out of a grayhound bus or Mack truck. You should have a 50% smaller version of that thing screwed to the distributor with that end terminal soldered to a solid coper wire with green or black insulation going to the points screw terminal on the distributor.
Not that the big hunk would not do the same thing, its just 2X bigger and hard to mount anywhere and if the braid goes to the end terminal, it is hard to insulate.