York Furnace P3UGD16N09001B (Circa 1989) with AC

This model uses a S1-02521911701 transformer that has the wiring block integrated with it that is fried with 120V present on the primary side and 0V on the secondary side due to a short and so I have ordered a new one. The current tstat is the original mercury tube one using only R,G,Y,W terminals. What is confusing to me is that the wiring block has nothing attached to its Y terminal and the Y wire to the tstat and two heavier gauge wires attached to the C terminal. I wish to change out the tstat to a programmable one that needs a C wire for constant 24V. There is a spare blue wire in the loom, but it doesn't have continuity to the tstat end, so I wanted to go with the add-a-wire kit to be able to end up with the new stat. When I tested the wiring at the block before the short, I saw 24V between R and W, R and W and R and G, 0V between R and Y. How the heng should the wiring block be wired and why was the block wired this way?