Note that the battery in the diagram can be either a battery or a low tension magneto. If you engine was not designed to run off a coil, then you need some place to generate the make and break switching performed by the cam and wiper in the diagram. A coil can also be used in line with an igniter and low tension magneto to "power assist" the igniter.
In July 2001 Jim Kirkes said he had a buzz coil with markings B, T, and S near the terminals and asked which connector was which. B is Battery (positive connection), T is Timer (negative battery connection through some make and break system on the engine) and S is Spark (high voltage connection). Note that you can reverse the positive and negative connections and the coil will still work. Ford and many other manufacturers actually recommend periodically reversing the connections so that metal which transfers from one side of the points to the other will transfer back again reducing wear and pitting. I don't have any sound evidence either way so I'll leave it up to your whim. Since my engines don't run very often, I do not see any benifit in my case.
You should wire your engine with all copper wire, there is no substitute for a stationary engine. You can either use standard automotive wire, or you can buy "period" style wire from enterprises such as: Rally Badges (Australia),
Bill Lopoulos Magneto Parts (USA),
or Star Bolt(USA).
I've personally dealt with all three of these suppliers and found them to be reputable.