Disconnect the Mercury switch. It is on the front cowling support, and looks like a condenser from a magneto ignition system. Next disconnect the black/yellow wires at the switchboxes (there are two switchboxes. They may be on top of one another). Crank the motor and see if spark returns. If it does, you likely have a ground in your ign killler wire (black yellow), between the switchboxes and the ign key. You could also have a bad ign key.
Remember that ign system is an Alternator Discharge Ignition (ADI) system. It does not use any battery power to generate the spark. The black/yellow wires are grounded to kill the spark.