Basic question (newbie)

"I found the 12 volt key source in the engine compartment (orange wire about 10 guage) I am assuming this goes to the little stud on the engine side of the starter."

There's no orange wire on the starter. Inside terminal (S) has only a purple wire on it. Don't have a 70 schematic handy and can't think of a large orange offhand. Post some more information about where it is or appears to come from. Someone should be able to track it down for you.

"I was told to run the wires back to the battery for the msd. But if I put the hot wire to the main stud and ground the neg would that be the same thing?"

I'm far from an MSD expert. Would recommend that you follow the MSD instructions. The instructions are downloadable. They have a tech support group that will tell you how to wire their product if there are questions.

Now that leaves me with a total of 3 wires to the starter: my msd hot (main terminal), the battery cable (main terminal) and the orange wire (small stud on the motor side of starter) is that correct? Also some proper terminology would be great to."

No. Not quite right. Orange doesn't go here but should have a purple. MSD box does not go here. Add-on equipment never goes to the starter.
If I typed it right here is MSD's site. www.msdignition.com

"The orange wire with the ignition on is hot. It's on the outer fuse block (inner=under master). My headlights work with the wire not connected to anything and so does everything else."

I'm not aware of an outer fuse block. Maybe someone else can add to this.

"If I have 12 volts from the orange wire why wouldn't it work? Not argueing with you just curious."

Nor am I arguing with you. From where I sit I try to "see" what you are seeing. A lot of guys out there have thousands of dollars under the hood. The last thing I want to do is suggest something that may cause an electrical fire under the hood. I'm not sure about the orange wire. Beginning to suspect it's something someone slipped in. The correct wire is a purple wire from the neutral start switch since you have an automatic. Just being as cautious with your car as if it was mine.

"The MSD manual says to run the heavy red and heavy black to the battery. One of my friends (who is a mechanic) said I could put the heavy red to the starter and that would be the equivalant of the pos terminal."

The key word in here is equivalent. Your friend is correct. It is the same as running it to the starter. Nobody I know does that. The wires that already run down to the starter have problems from heat. Also the wires should go to the best source which is the battery. Positive line should be fused in accordance with MSD's recommended instructions. Just my opinion.