"....It would work to stabelize a DC voltage, but not an AC one..."
But isn't it a fluctuating DC in the Z winding that then causes the poor AC?
If so, could the capacitor be put in line (actually parallel I think) with the Z?
The Z winding generates the energy used by the field. it is AC, and goes thru a diode rectifier to make unfiiltered DC to be fed back into the field. The Z winding generates energy based on 2 factors. Generator load, and generator RPM, so the voltage output is partially RPM dependent. The RPM fluctuations of a single cylinder4 stroke engine(acceleration during power stroke, and deceleration during other 3 cycles) is what causes the flicker.
Caps added to the field diode output, will filter the rough half wave rectified DC into a flatter DC voltage, which will clean up the AC output waveform. It will also increase the voltage output a little, but will have no significant effect on flicker, because the source(z winding) is still varying with the RPM pulses...
The only ways to get rid of flicker are to:
1. Reduce or stop the RPM fluctuations, by adding cylinders, switching to a gas turbine or hydro as a prime mover. Adding flywheel mass will reduce but not eliminate the pulses from a single.
2. Add an AVR that will monitor the output and modulate the field input to electrically stabelize the voltage output and help tame the flicker.(most common modern solution)
3. Add a cam and contacts to switch resistance in and out of the field circuit in conjunction with the power stroke to modulate the field input in conjunction with the power stroke to help
tame flicker.(old school solution used by Onan and I suppose others)
4. Use the generator output to make DC and either charge batteries or directly feed DC to an inverter, and use the flicker free inverter power.(Honda's solution used on EU series inverter/generators)