#1 - the cables touching each other won't hurt a thing with the battery out.
#2 - if you add a cut off, it has to include the wire to the battery on one side, with all the other wires to the system, on the other. it can be on the negative side, but "most" racing organizations require it to be on the positive side. that way, if something comes in contact with the body structure and a connected part, the circuit will not be re-energized.
i'm not a fan of those key type switches. they seem pretty cheap inside with tiny contacts, no matter what continuous amp rating they have. just my opinion.