Adding a Battery Disconnect: What wire?

Use a pre assembled cable from any auto parts store then wire the disconnect through the ground circuit.

"SGT" battery cable. Some RV dealers or independent RV shops will have it as well as battery shops. Can be ordered off ebay by the foot too. I have 20' of red & 20' of black SGT that I don't need - drop by!! Has enough strands in it to make it reasonably flexible.

#8 AWG is kinda small but is what they typically use. #6 would be better but for such a short length doesn't matter.

The type of wire in your photo is shown on the jacket and is type "MTW" which stands for Machine Tool Wire. It's intended for machines and inside appliances. I don't think it's suitable for battery cable use but could be wrong. Selecting wire with the correct jacket material takes into consideration physical abuse, exposure to UV, moisture, temperature, oil & grease, etc. Some use welding cable in RVs because it has more and finer strands that makes it very flexible and the jacket material is okay. I just bought some welding cable at a tool shop for a car I'm restoring and it was on sale and much cheaper then getting SGT wire somewhere.

There are many battery disconnects that attach directly to the battery post, no need to add any wire.

I would use a pre-made battery cable. Many are around #4.
Use multi-strand wire and not building wire. More strands the better.

I would go #8 if I could not just cut existing and insert the switch.

Get the exact length and lugs right here all crimped and sealed ready to go:
http://www.genuinedealz.com/custom-cables?size=55

That size or bigger. An easy way might be to find one at an auto parts store with the terminals already on it. They are usually heavier for engine starting but it will work just fine. Look at the stud sizes on your battery and switch.

An example but you can find shorter or longer depending on where you would like to place the switch.