Good thoughtful questions, not sure I can give any exact answer not knowing the cutout or voltage regulation circuitry (to whatever if much of any extent) your old chevy has.
The very early systems used ONLY a cutout relay that works basically as you suspected which closed when the genny reached a pre set voltage (to charge battery) then opened at lower voltage (so battery didn't reverse discharge thru genny). It has in and out voltage settings and the contacts can become resistive or burned which affects charging LOT OF VARIABLES
On those early systems many were three brush gennys which had an adjustable third brush so you could regulate the max charge at high RPM so the battery didn't overcharge and boil out the acid (That may be what you have???????????) IN addition some tractors used a manual LOw/HIgh switch (maybe part of the light switch) for low or high charging settings. Low maybe for day use at high RPM and High for night use when lights are on and/or a lot of low RPM use
Later systems had a more sophisticated and better regulation using a full fledged Voltage Regulator which in addition to a cutout also regulated field current flow for more precise charging. The early ones had one additional relay which was a combination Voltage and Current sensing regulator while others had TWO extra coils, one for voltage regulation and a separate for current regulation.
NOW FOR HOW YOURS IS WORKING it sounds like its doing all it can based on its early simple basic operation method. Charging depends on RPM,,,,,,,,,,Belt Tension,,,,,,,,,Battery condition,,,,,,,,,,Genny condition including BRUSHES and tension and commutator. I don't think I can give any exact answer as to HOW IT SHOULD WORK since it depends on battery voltage and third brush location and the cutout relay contacts and the voltage in/out settings
Stabilization is improved if the brushes are long enough with sufficient down tension and especially a clean smooth non oiled non carboned commutator and a good tight belt and a good battery. If shes not charging enough adjust the third brush if it has one and its adjustable
Theres more but I'm headed to a bluegrass festival and need to get going, I will check back tonight
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