Hmmmmm. + 1 on both points
There are only two sorts of ignition coils I know of on motorcycles (or anything else). In one, the coil must be grounded because the (-) side of the high voltage circuit connects there. In this type of coil (like a GM HEI for example) the high voltage secondary circuit is in no way connected to the low voltage charge and trigger side. So if not grounded, there will be no complete circuit, and no sparks.
In the other type, which if originally triggered by points is the type you have on the XS (assuming you have an XS), the coil itself does not need to be grounded. The High energy circuit is grounded through the condenser. In this scheme, the High voltage circuit does indeed piggy back on the (-) wire going from the (-) side of the coil to the points, however, when firing the spark, this circuit is completed through the condenser, not the points. The (+) 12V side of the coil is not in any way involved in this circuit, and the diagram is missleading. (no offense Mydlyf, I presume you did not author the diagram).
Assuming your XS originally came with points, and you are using the OEM replacements from Mikes (I have used these myself - Vastly superior to the original Yamaha parts), They do not need to be grounded as they do indeed ground through the condenser. Since you evidently are getting some spark, the problem would seem not to be with the coils but with the spark timing. Spark plug wires crossed or ground wires that go to the points (condensers) crossed, or you have got your timing way out for some reason unrelated to the coils. Boots are unlikely to be a problem unless you somehow don't have them installed the very obvious way, and am pretty sure the 5K resistance is proper for the OEM style coils. Just in case you have the Dyna copy high output coils (used these too) make sure you don't try to run the bike with the High Voltage spark leads disconnected or you can fry the coil.
