The external coil on my 2.8L is arcing from the plug tower to the coil body. Does this indicate a bad coil or bad cap (current taking the path of least resistance i.e. not the cap)?

 

Definitely shouldsn't be doing that. If you're on a very tight buget you could start by just changing the coil wire- it might have a breech in it somewhere near the tower allowing the spark to escape. If that doesn't work change the coil (body might have a small crack in it). Neither part is very expensive.

However, usually when you find sparks getting to the outside world with older parts it's usuall an indication that many of the parts are past their prime- wires, plugs, cap and rotor, in which case it's best to replace all of them as part of a complete tune-up.

 

Almost every part of the ignition system is new or somewhat new. Cap, rotor, wires, plugs, and distributor have all been replaced recently. The coil is an MSD Blaster II which is a few years old. I'm also running an MSD 6AL. Guess I'll start with the coil and cap and see if that fixes it.