Sounds like the electrical part of the ignition switch.  Try jumpering around the switch, and see what happens.
Roger Van Till <rvantill@SBCGLOBAL.NET> wrote:  I'm at my wit's end. My 79 Rabbit died while idling the other day. I
have spark and fuel with the starter engaged. Let key back to run
position and it dies.
I bought this for a winter beater. It ran great before this came up.
Has to be something simple/stupid but I'm new to Rabbits.
Roger Van Till
'89 Westy "The Moose Lounge"
'86 GL "Sugaree"
'81 L "CoJack"
www.busesbythebeach.com
http://members.aol.com/Fkc43/rainfly.htm