OK, here's where I am on this as of Friday 7/27.
On Monday I cut open the last section of harness and found nothing wrong in any of the wiring.
I taped the harness back up and reassembled the truck to a point that the engine could be started and run.
With a NEW ignition switch in place, I ran the engine for 45 minutes at 1,500 RPM with a volt meter connected across the battery. System voltage remained at 14.3 to 14.1 the entire time.
Never blew the fuse.
Just to make sure that the new ignition switch had "cured" the problem, I then put the old ignition switch back in and ran the engine at 1,500 for more than an hour and it never blew a fuse! !@%^^&$%#@!&%$#!@#* !! And the old switch never got hot or even warm. I took the old switch off and once again measured the resistance and it still shows around 9.3 Ohm.
But not wanting to give this old switch any benefit of doubt, I consigned it to my toolbox (for future reference and possible use in a DIFFERENT truck to see if that truck blows a fuse) and put the new switch back in.
So I am unable to prove anything about what was taking place at the beginning but I can't stop wondering if the initial finding of the wiring harness pinched between that bolt head and the steel hydraulic pipe might have somehow resulted in current sort of "bleeding" through the thinned out insulation and heating up the fuse after a few minutes of operation.
The final test was done on Friday by putting the truck back together completely and letting shop personnel use it (instead of our designated shop lift) do normal tasks.
Truck ran in intermittent duty for about 5 hours with several different operators and the fuse has not blown yet.
Before I drove the truck back to the dock to release it to service I personally drove it across some rather rough areas of pavement to kinda simulate the conditions of entering and exiting trailers that are mismatched to the dock plates.
It did not blow a fuse.
Time will tell if there is still a problem.
If it blows the fuse again I will revisit this thread with that story.

??
OK, it's in there now.

L1ftmech, add your e-mail address to your profile.

That ignition switch might be an anomaly in our fleet. This switch has a metal body. Therefore the body itself would be immune to melting and sagging. All the other ignition switches I have seen in our fleet have a plastic body and are configured for a "4 wire connector". But this truck is a non-TWC 7F whereas the TWC trucks might have a 4th wire in their connector............I will have to pay closer attention to the connector next opportunity I get to see a TWC model switch connector. Perhaps the metal body switches were used in the earlier 7Fs without TWC. To be honest, this situation is the first where I needed to investigate the circuits and components associated with the AM1 fuse. Never before saw this problem. Previous fuse blowing events on other 7s & 8s have all been on a branch circuit and caused mostly by wire breakage due to the extremely "vibrant" 4Y engine.
No fusible links in this electrical system. The alternator charging current feeds into the same buss bar that feeds the White-blue circuits. The alternator charge output current goes through an 80 amp plug fuse to feed the buss. This buss is connected to battery + through a heavy gauge cable. Because the AM1 fuse is fed by the same buss, a short in the cable from buss to alternator output would blow the 80 amp fuse, but not the 40 amp AM1 fuse.
Sure would be nice if members could post photos to a thread because if we could, I would post some non-copyrighted, photos of the actual wiring here.

anything over 15v is a redflag
it sounds to me as if there may be a voltage regulator issue in the alternator, possibly a diode problem. have the alternator tested and see. mrfixit's suggestion sounds right on about checking the "runtime" voltage. It should be anywhere from 13.2v to 14.8v. One other thing i would check would be the positive output wire from alternator to battery, check for chafing or rubbing to frame and if it has fuselinks check those too. (not fuses but fuselinks, they are special wire links that are designed to blow under overload conditions)

as for the high resistance in the key switch? thats not uncommon if it has age on it, replacing it might be a plus but i doubt it can cause enough resistance to blow a 40A fuse without a noticable immediate problem when the truck is running. The only thing i can think of that it may cause would be a meltdown situation in the switch itself from the heat transfer inside the switch area from the bad connection.

Thanks mrfixit, I had not thought about that aspect of the situation, but..........I can state that in tests, we have run the engine in our shop at idle RPM only, and it still blows the fuse.
When I get this truck back to running order on Monday (7/23) I will definitely check the system voltage level....at idle and higher RPM.
Not sure if idle RPM would be sufficient to raise the voltage to a harmful level with a defective voltage regulator, but it will for sure be looked at now.
Pondering that possibility I would presume voltage reaching 16VDC or higher would be the smoking gun in this shooting.

Did you check the voltage in the system? If the voltage regulator is letting the alternator charge at full speed ahead, after starting it, the battery voltage will start to climb and continue to climb. In 10 minutes it may be high enough to cause high amperage in that AM1 fuse. I = V/R

Friday, I removed all the dash panels so I could see the entire length of the harness. Where the harness runs up the front bulkhead, I saw that it was pushed tightly against the bottom mounting bolt head for the control valve lever bracket-left side.
It appeared that the bolt head was buried deep into the tape wrapping the harness, and I was certain that I had located the problem spot. No such luck! What the bolt head was buried in was a 3 inch section of sponge/foam type over wrap covering the loom at that spot.
The wiring inside was intact.
I continued to open the harness and inspect the wiring.
Thus far I have cut open the entire length of harness except for the section that is stuffed into the white plastic hanger channel behind the brake pedals.
I am re-taping the harness as I go about every 8 inches (so as to maintain the OEM shaping somewhat).
I have also checked the connector bodies where the front harness mates to the fuse/relay box harness and those are good and clean.
I removed the one zip tie and the saw tooth clip that secure the wire bundle to the underside of the fuse box and spread all those wires apart for a look.
Absolutely nothing wrong.
I then got out my Ohmmeter and tested the ignition switch resistance.
The switch that is in this truck has a metal body and only three terminals. The harness connector also has only three wires.....White-blue power in, Black-yellow power out, and Black-white starter signal.
Resistance across the White-blue to Black-yellow terminals is as high as 9.4 Ohm.
Testing across the same on a brand new switch shows.3 or.4 Ohm.
I know the electrical load on the White-blue and Black-yellow wires from and to the fuse box cannot possibly be all that great because there are no really big individual loads (based on each fuse ampacity) fed by the Black-yellow wire.
On this truck (non TWC) the electrical loads present when the switch is in the RUN position are:
Ignition coil and igniter module, main fuel solenoid and its relay, temp gauge/sender, transmission range solenoid, and alternator "S & IG" loads, and the engine shutdown timer and relays.
I am wondering now if perhaps this ignition switch resistance might actually increase under a load to exaggerate the amp draw that the 40 amp AM1 fuse has to bear but the individual branch circuit loads don't blow any of those fuses because the summary ampacity of the branches is great enough to stave off thermal overload long enough for AM1 to fail (which then interrupts all the branch circuits too).

As to the starter relay being involved in this somehow:
The White-blue wire indeed provides the power that will activate the starter motor solenoid, but there is a load draw on that portion of the White-blue circuit ONLY when the key is turned to the start position.
So that load would not be present when the key is not at start position. The only way a defective starter relay could could be adding to the RUN load on the White-blue circuit would be if the W-b input of the relay were somehow bleeding over to the relay coil ground wire terminal, and I don't see that as a likely scenario and still function properly otherwise.

I plan to open and inspect the remainder of the harness on Monday even though I suspect it will reveal nothing, I just can't chance it after having cut open the rest of the harness.
Finding no culprit I will restore everything to running order and install a new ignition switch. That metal bodied switch has my suspicions raised as this is the first metal bodied ignition switch I have found on a 7F.
This truck was transferred to our dock from another city where it was maintained by either a small shop staff, or outside vendors. Because that terminal was closed up, their small fleet was redistributed nationwide and I have no way of checking any real time history.
I did get 1 clue that this problem has been around a while because the OEM 40 amp plug fuse has been replaced with a short 2 wire ATC fuse holder.
I even wondered if possibly the plug type fuse would be better able to resist blowing if the overload was an expected even by design of the system. We tried an OEM plug fuse and got the same results as with a 40 amp ATC.
I will definitely update this with my findings as I continue solving (hopefully) this issue.

Toyota forklift quality has been going downhill for a longwhile & the sad thing is they are now dragging BT Rolatrucs product quality down to this level as well.
Worse thing BT ever did was get involved with Toyota.

I would agree that wiring harnesses in newer Toyotas aren't what they used to be (beginning with the 6 series). After checking the obvious (fuse box. etc, ) I'd unwrap the suspected wiring harness just to be sure. I had an intermittant short in a 6 series that turned out to be wiring worn thru inside the wiring harness. ( the way Toyota splits off pigtails is sad. They removed a little of the insulation on the main wire, laid the pigtail on that wire & then used a metal band (about 1/8 in diameter) & crimped the 2 together- no insulation or anything covering this junction- then they just surrounded this juntion with the other wires in the harness. Needless to say, the wires surrounding this juntion eventually wore thru & shorted thanks to the uninsulated juction.)

This was a factory wire harness which had not been altered- I worked on the truck since new. That was the beginning of the end for my respect for Toyotas.

After looking at the wiring diagram i would also check the starter relay also, change it out with a known good one and see if that cures your problem

After looking at the wiring diagram i would also check the starter relay also, change it out with a known good one and see if that cures your problem

I would give the fuse box area a good looking over too.