Could be just a bad switch -- or if someone had shorted wires the contacts in the switch could be pitted or burned -- If you have a meter check the continuity in the switch with key on and off (take the connector off the switch first). Check all your wiring for proper continuity. I'm guessing since you have the wiring diagram you understand continuity.
Try some contact cleaner (Radio Shack - Auto Parts) in the switch key hole and operate the switch several times.
When I tested the ignition switch I found that there was no continuity at any time between the yellow circuit and any other circuit. If the switch is open to the yellow circuit would that be the problem?
