I dont mean to sound rude at all but you seem to be contradicting yourself.
You say you have 12v at both the On and the Start positions but then go on to say that you are losing 12v to the coil when the starter powers up (this point should be the 'START' position on the ignition barrel).
You must be losing power to the coil at this point by what youre saying when the starter solenoid powers up...
not rude i know it sounds dumb, any way i was going to do your tests tonight so i went out to look for my multimeter and cant find it as my garage is getting rebuilt around my car and i have my crap everywhere.
anyway i had another look at the starter relay wiring. and turns out my earth wire into the relay was not an earth. so i ran a wire to the neg battery terminal to the relay.
so thats fixed the problem, i have no idea why that would make the starter wire at the ignition switch trigger with earth not power. but it did( someone thats good with elecs may be able to explain why?)
so now i can have the key in the "on" position and the reds are on, and as i turn the key as soon as it hits the "start" position it triggers the starter and the car fires up.
what was happening before was. i would have the key in the "on" position and i would have the reds on , and as i turned the key it would just hit the start position, and i would still have the reds on, but no engaging of the starter.(because i had no earth at the relay, and start wire was getting triggered with earth) but as i turned the key around further(but still in the start position), the 40 year old ignition switch would break contact with the "ignition" (power to coil and red lights) and the switch would earth out, and because the starter was getting triggered with earth it would engage the starter.
and way thank you to all the chipped in. cheers