So explain it again, then, because I still haven't followed you.
According to Revband's dictionary definition, a magneto provides "ignition current". Doesn't that suggest it's the device which powers the spark plug?
Presto's definition includes the words "pulse voltages to specific times", which again implies more than the simple AC generator which we've got in our Bullets, because the rectifier doesn't care at all about the timings, and in any case the device in question doesn't generate pulses, but sine waves. "...pulse voltages to specific times" again suggests an ignition generator rather than a simple AC generator.
On the other hand, Wikipedia calls an AC generator with permanent magnets (like our Bullets) a magneto, saying that the term "alternator" is usually reserved for devices with field coils. This is a new one on me, but if it's in Wikipedia it's bound to be right.
I certainly think the argument to change the terminology in the diagram to include "magneto" is won, because that's what everyone calls it these days. But allow me to refer you to this:
1956 parts list