OP here. I should have added that the outlet he was plugging into to power this monstrosity was wired correctly and tested correctly.
Here is what I found.
He wired everything correctly. BUT! He used stranded wire and did not get all of the strands under the screws in the plug. One or two of the strands from the hot wire were touching the neutral screw inside the plug.
That let enough current go up the neutral wire to give a hot/neutral reversed test when the switch was off. When turning on the switch, that also energized the hot wire lighting it up too. I guess it also gave enough hot current on the neutral to keep 120v stuff from running, since both hot and neutral were at the same voltage.
What I don't understand is why it didn't either blow the fuse (old house) or heat up enough to start a fire or at least burn up those 1 or 2 wires.
I loosened the screw, twisted up the stranded wire and got all of the strands back under the screw, and it works just like it should.