That piece is attached to the left end of crankshaft. The alternator is similar to the 650 but mounted on a jackshaft above and behind the crankshaft.
Notice how the arc of magnet looks to be same as the range of advance. I think the leading edge of the magnet is full advance and the trailing edge would be the retarded timing spot.
Right now I have the XJ igniter box hooked up to the the XS650 retarded pickup coil. I get spark at the fire mark at idle. When I rev the bike the spark actually retards about 5 degrees.
If I hook up to the advanced coil the bike is really hard to start but it fires at the fully advance mark. I have been afraid to rev it above idle because I'm fear that it might advance the spark even more.
So my thought is to extend the arc of the pickup coil to get the same range of pulse with the 650 small magnet that the longer magnet gives with spot coil on the XJ.
The Virago 535 uses a similar rotor to the XJ. The igniter box for the Virago is ~ $30.00 on Amazon.
So
Stock XS650 TCI stator and round magnet.
Stock XS650 Charging coil
Rewound XS650 TCI pickup coil that covers the retarded to advanced range.
Virago 535 TCI igniter box.
Thoughts of a mad man in his recliner at 3am.