Could be the "permanently lubricated" needle bearing in the generator head has seized and spun. When it fails it lets the armature rub on the field poles causing drag/sparking.
To inspect, remove the thru bolts holding the generator head together then carefully pull off the end bell (watch for the pair brushes that will pop free as the end bell comes off). The bearing is pressed into the plastic end bell. Unfortunately when it fails it usually destroys the end bell.
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