This is the old Motorola alternator circuit which hasn't been used since the 1960's. No modern system uses the extra "diode-trio" to feed the Voltage Regulator/Field Excitation. Note that the VR is not sensing the actual battery voltage, but is sensing an "artifical" voltage which is supposed to have some relationship to the battery voltage. The shorted diode confused the VR by reducing the output of the "diode-Trio", causing it to over-excite the alternator. I'll bet this from a boat equipped with a Paris-Rohne alternator...
I would scrap the diode-trio, and connect the VR to the battery bus through the Ignition key-switch, which is the way 99% of the 600million cars in the world do it.
Over-exciting the alternator causes too much current to be sent to the battery. This causes the water in the battery to be seperated into hydrogen and oxygen. It isn't really boiling, it's turning water into gasses.
Boiling water is the act of heating it to its boiling temperature and turning it into water vapor. It is still water. Seperating water into its component gasses is called electrolysis, and it can be done at a lot lower temperature than boiling. Sometimes it is important to know that the temperature of the battery was not 212 F...or whatever the boiling point is when mixed with sulphuric acid at an unknown altitude. Sometimes it is important to know that electrolysed gasses are flamable...but you already know that. I think you asked in order to get me to type out a clear explanation.