I finally had time to work again on the grinder (work, family, vacation)!
In the end I decided to replace all the wiring, as all of the joints looked somewhat oxidized and not that well made.
I've bought a length of SIHF-J 3G1.5 cable (180C-rated silicone insulation) and used the individual wires to replace the old ones. I decided against heat-shrink and instead used self-fusing F4 silicone tape which I had.
I used high-temp sensor-safe (supposedly neutral cure, although it did smell similar to the regular acetic cure one) automotive RTV silicone sealant, and then some thick-ish polyester thread to tie things up (hopefully it won't cause problems later).
While I was at it, I replaced the power switch with an electromagnetic switch (KJD17).
I didn't have the time to put the grinding wheels back on, but it starts and runs (and stops) fine now! I can hear the centrifugal switch during start and stop, it sounds different from what I imagined (from reading it described as clicking), but now I know how it should sound like 
Thanks to everyone for your encouragement. At some point I was about to throw everything in the bin, and it's only due to positive messages I persevered, managed to track down the issue, and in the end get a working grinder. Although a quite dear one, by the amount of my hobby time invested 





