I have a basic question on reefing with my present system set-up.
1. Is the red line path correct or should I tie off to the sliding eye?
The red path is wrong IMHO, you should probably tie the line around the boom if it is a loose-footed mainsail and then run it up to the reefing cringle and then back to one of the outermost sheaves on the boom, ignoring the eye and the cleat altogether.
2. My clew line is rope to wire.
A. Is the wire necessary?
B. Is there a block inside the boom ? I am unable to see inside the boom since the sheaves are riveted to the end and so are clutches at other end of boom.
The clew line is called an outhaul and it doesn't need to be wire. However, if you do decide to replace it with an all rope outhaul, make sure the sheaves are the right kind for rope. Sheaves for wire will have a v-shaped groove, those for rope will have a u-shaped groove in the sheave.
As for whether there is a block inside the boom...it really depends on how big your boat is. On a boat smaller than 25', I would tend to doubt it. On a boat bigger than 25' it is very likely.
3. If the above is correct where would my 2nd reef lines run ?
The second reefing line would tie to the boom and run up the other side of the sail from the first reefing line, through the reefing cringle and then down to the outermost sheave on the side opposite from the first reef.
For example, if the first reef goes up the port side of the sail and down to the outermost starboard sheave on the boom's end, the second would go up the starboard side of the sail and down to the outermost port side sheave on the end of the boom.
I hope this helps.