I just re-installed my HEI and I noticed that the engine won't run while I'm cranking the starter. It will start after I release the starter and the switch falls back into the 'ON' position. The power source for the HEI is 12 volts with the ignition switch in the 'ON' position. What's happening here?

The spot you picked, off the fuse block, doesn't have 12 volts in the START position. What's happening is the HEI isn't getting power until you release the key back to RUN. Do you still have the yellow wire that ran down to the solenoid "R" terminal? Tie that wire into the HEI BAT terminal along with the wire from the fuse block. Don't tie the original resistor wire in there. Keep that taped off. The yellow wire should give you 12 volts in START.