Ignition or Electrical problem?

Correct, the red/blue wire goes onto the S terminal, this is the starting wire from the switch. Test by connecting a voltmeter to the red/blue wire at the relay, turn the switch to start position and see if you have 12 volts. If not, there is either a problem with the switch or there is a break in the red/blue wire. Try a jumper from the positive battery terminal to the S terminal on the relay and see if the starter cranks. Is the black/yellow wire connected to the relay battery terminal? You can check for voltage on the yellow wire at the switch, that is the power wire. Here's a link to a schematic if you don't already have one.

http://averagejoerestoration.com/re...agrams/1965-mustang-wiring-diagrams/1965c.jpg

Okay, if you have no power to the inside of the car, then you need to check connections on the battery terminal of the solonoid, the connection on starter side of the solonoid has only the heavy wire going to the starter, and your battery + and - connections on the battery, just because it looks good does not mean it has a good connection, a voltmeter or DVM would be a big help if you do not have one W-mart sells a DVM for about $20 it will pay for itself the first time you fix a problem. Don't buy any more parts until you get it figured out. The schematic 'creaky" posted will help a bunch. A missing ground connection can be the same, the grounds are the heavy black cable from the battery - term to the engine block, in front of the motor mount, there should also be a ground wire from the back of the passenger side head to the firewall, and the mounting ears of the starter solonoid must have a good ground also, or it will never energize ( I ran a separate ground wire from the block to the starter tabs using the same size wire as the ground on the passenger head 8 or 10 gauge stranded, do not ground it to the same place as the battery - cable on the block. Post your results. Good Luck.