Some background info:
Engine is a Honda BF50.
Meltdown occurred on original wiring job (1997 or so).
Recently replaced a faulty regulator/rectifier.
Batteries are 2 Optimas D31M
Last couple of times or so that we went out I noticed I had to hold ignition contact for about 4 seconds before the starter motor would turn the engine, as opposed to the immediate turn of the engine it should normally give with a fully charged battery. I attributed this to a probable faulty starter engine.
Next failure was the engine lift, right at meltdown it would raise up very, very slowly. The tilt switch at the throttle began making a hissing sound when I would press it, and I knew immediately I was dealing with a short. When I went below deck to inspect (I thought at first the problem was inside the console), I noticed a faint burnt rubber smell. I traced the smell all the way to a panel in the aft berth alongside what would be the inside of the transom, were some very thick engine wires run through. I immediately unscrewed such panel, and I found this:

Immediately shut down the engine and disconnected the battery terminals. Glad I had my TowBoatUS membership current
Turns out it is the negative wire that runs from the batteries to the engine. Meltdown occurred at the crimp site. So now in hindsight I am guessing that the starter failed because it wasn't getting enough current due to a faulty crimp. Same for engine tilt.
This is a pic of the positive engine wire, which did not burn. It is the black wire that runs horizontally throughout the middle of the pic. To the right is the negative wire which I cut to remove the damaged segment:

The inside diameter (only the copper threads) of both the positive and negative cables that run from the battery up to this point is about 11 mm (cable says 2 gauge UL). They are crimped to a thinner cable with an inside diameter of about 6 mm (sorry I have no wire gauge and cable does not indicate gauge at that point). This cables run parallel to the engine to the starter and starter solenoid I believe.
I recently replaced a faulty regulator and this was our first trip out after this. I am trying to figure out whether this failure was caused solely by a crimp job gone bad, or maybe something else??
I am assuming that it is not a good idea to crimp a thicker gauge cable to one that is roughly half its diameter, as this would create resistance, especially in applications were higher than usual amp draws are required. Wouldn't it be better to just run 4 AWG cables from the battery to the engine? Why bother crimping them down halfway?
This is also 1997 wiring running from the battery to the engine, very likely not intended for an AGM battery output and in need of upgrade.
My knowledge of electricity is very basic, so please excuse me if I cannot follow very technical explanations. Thanks for any input and suggestions!
