That is true KW, but seems odd that on low it was fine and hi setting it is not. But then this is RF and all sorts of strange things can happen.
Yes but remember that the high setting may increase the plate voltage but it also increases the RF output. If that loading cap was in any way compromised by a defective or bent plate it may only arc on high.
What about wire from loading cap to relay. Is this a good solid connection. I have seen a transmitter with a bad connection at cap and the rf is trying to find a path. Just a thought.
Any loose connection can easily arc and that would in turn cause a huge change in the reactance voltages which could very well lead to a breakdown of the loading cap. Plate voltage is one thing, RF voltage is another albeit much lower than typical plate voltages however when it comes to reactance voltages all bets are off. It is not unusual to have several thousands of volts develop in an antenna tuner or amplifier when things are not right. The big reason I say the loading cap has the proper plate spacing is that it was built that way and obviously worked fine before.