Jim Sizemore, this file may provide a wiring diagram closer to a schematic than what you're looking at now (Chapter 17):
This is the whole Clymer manual for Generation 1s; I saw no copyright protection warnings; AFAIK
this is public domain.
Anyhow, the RED/BLACK wire from the CDI must "see" a ground for the bike to run; the ground can come from several paths.
The starting circuit relay can pick up a ground from either the starter lockout ("clutch safety") switch or the neutral swith.
Switching logic prevents engine operation with the bike in gear, clutch lever out, and sidestand down.
As to the starter relay connections, the great big one connects directly to the battery positive terminal; the small connection connects to the starter circuit relay. + 12 VDC on the latter (from the starter button) engages the starter relay, connecting its contacts and powering the starter motor.
Wasn't gonna do this, but . . . here's a matrix of safety switch scenarios, a partial chart (the "how it works" column is missing), from an Internet posting long ago and far away:
Wish I had done a better job of saving the info, but--maybe this will be of some use.