Agree, the connection to the fuse block looks bad. I assume that is short 8 awg wire from the breaker to the fuse block. That really needs to be pulled off and changed. The terminal on the block needs to be checked, to make sure it is not damaged.
This most likely started with a loose connection that caused arcing and got worse from there.
I would check the voltage of house battery, you could actually do it at the circuit breaker. If the voltage is always good there, I wouldn't even bring the separator into play.
If you don't have tools to fix the wire, let me know. I won't be home until the weekend, but could make one up for you and ship it out. It will be of much better quality than the sportsmobile one. Just let me know how long it is, and confirm it is from breaker to fuse block.
Also unless you disconnect the battery this circuit will be hot, thus be careful. I would take off the breaker side first. It is not impossible to work on, but you have to feel comfortable doing it. Make sure anything downstream of the fuse block is off, pull fuses if you have to.