I'm with TJeff ^, capacitor on the neutral/white wire side, not on the hot/black side. This is from my experience of numerous 'rebuilds' of mostly Craftsman grinders.
I am also on my first cup of java, but have searched many diagrams of grinders with start capacitors, most use a relay instead of a centrifugal switch to control the start-up motor windings.
Given the information/pictures above, my recommendations may need to be adjusted when/if better pictures of the label and wiring are available.
I would replace the power cord and wire it as it came apart and add a chassis ground.
I would replace the light switch with a motor rated power switch.
Note: I typically replace the following when the grinder is being 'rebuilt'.
Bearings
Wire wheels/grinding stones
In the spirit of best practice/safety, replace any missing parts, such as:
spark arrestors
tool rests
eye shields
wheel guards
wheel covers
Here is a diagram of a CM grinder with a start-up capacitor and centrifugal start-up switch. Wire colors may differ from your model.
Also, here is a a thread I posted on OWWM website about a CM grinder.
http://vintagemachinery.org/photoindex/detail.aspx?id=12609
Note: The centrifugal switch is fragile and may be damaged when the end bell is removed.