Sam,
The p lead shield is (should be) doing double duty.
It's helping keep mag noise contained while the mag is running, and that requires a good bond to the mag case. Grounding it elsewhere has the potential to drive noise into other components, since any noise riding in it will have to travel along the airframe back to the mag.
The 2nd job is to provide a grounding path to short out the mag's points when the ignition switch is 'off' (meaning the contacts are closed, in this case). In this case, if you ground the shield elsewhere, it can't do its job at all. It's been a while since I played with an actual ignition switch (I use toggles), but I'd check on whether the 'ground' terminal in the switch is actually grounded to anything. If you tie that terminal to local ground, you're depending on an uncounted number of junctions through the airframe to get the ground path back to the mag. That can be a safety issue.
To terminate the shield, you can use a solder splice, as others mentioned, or just solder a short pigtail of wire to the shield & cover with shrink tubing. Terminate the other end with a ring terminal to fit. The tubing just serves as a strain relief on either side of the actual joint; a cheap/quick way to make your own solder splice. Even a PIDG crimp terminal could be used, but they tend to be a lot bulkier and heavier than a simple soldered joint with heat shrink.
edit: If the harness cap screws are long enough to add a ring terminal under one, that will work fine as the ground point. Yes, there's a gasket under the mag, but the bolts that secure it to the engine also electrically bond it to the engine. Even if they didn't, your goal is to tie the shield back to the mag, anyway. The mag is a generator, and its case is its ground. If you don't complete the p lead circuit back to the mag's ground, you can't turn off the mag. Using the airframe as the path from p lead center wire back to the mag case, is, as I mentioned earlier, a needlessly more complicated, less reliable way to do it.
Charlie