I was puzzling through the same thing a while ago for an American Flyer conversion. There is a Lionel e-unit diagram here for AF can motor conversions on Carl Tuveson's S gauge site:
Mike yes, that is AC input. Doesn't really matter which one, but one to center rail pickup, and the other to some pickup from the wheels. Looks like you have a pickup on the side of the chassis that touches the wheel axle. That would be the ground, if this has center rail pickup.
Seeing the rectifier, take the red as center rail, and the other black on the squiggle line is the outside rail. G
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