First off we need some vehicle clarification. You say '76 Travelall. IH stopped making those in '75. Do you mean Scout traveler?
The description provided is a bit vague. Are you saying that you just touched a loose wire that was not connected to anything else against this one solenoid terminal and the wire instantly burst into flame?
Looking at the front of your solenoid, there are three terminals. One large terminal in the center, one small terminal to the left labelled 'r' and one small terminal to the right labelled 's'. You should see the following items connected to the large center terminal:
1. One 4ga or larger cable running to the battery + terminal.
2. One 16ga wire running up to the #2 terminal of the alternator.
3. One 14ga wire with a fuseable link connected to the bulkhead connector on the firewall.
The 'r' terminal should be vacant, unless the original electronic ignition standard for m/y '76 has been retrofitted to a breaker points ignition. The 's' terminal should have only one wire connected, a 14ga wire which also passes through the bulkhead. This circuit originates at your ignition switch and "tells" the solenoid to engage the starter motor when you turn the keyswitch.
Please trace and verify the existence and condition of the wires as mentioned above and report back.