I kept having this nagging suspicion that I overlooked something in my troubleshooting. So, just like the movie "Groundhog Day" I decided to redo it all again. I went back through my manual just to double check each step. Well the old saying about not seeing the trees for the forest fits me perfectly.
I took a step back while checking all the circuits and two wires coming from the stator didn't look right. When I checked them closer I found that they had burnt themselves together right at the connection point. See first two pictures below.
After fixing the wires by cutting out the fried connectors and adding new ones, I coated them with liquid electrical tape and then overtaped with electrical tape. Tach still didn't work. I re-ran the trouble shooting and found that the voltage regulator was fried. So, a quick trip to the local Mercury dealer and I had a new one. Got it installed quickly (two bolts) and, viola, the tach started working.
All in all, I'm happy to have it working again. It certainly was a learning experience. I will be keeping a closer eye on those electrical wires from now on.
Tight lines.