I am not certain about the "Shellac" but its written in many tech articles as well as have been told by many who rebuild vintage Mags and generators that the coatings on the wires can degrade or go bad and the windings short out. So, I borrowed that term "Shellactitis" as it sums up the issue.
To be fair,, I have seen some ancient windings (The fine strand copper wire) in remarkably good nick despite age and history,, So perhaps its all a devious plot in a global conspiracy to incur higher costs by cranky old codgers eager to separate your beer slips from your wallet upon presentation of your unit for rebuild..
I have always had my Lucas and BTH units rebuilt and serviced by a number of trusted experts,, I will clean them, adjust the points and brushs, but have always farmed out that task for full overhaul on British bikes. (I hear Stihl Chainsaw capacitors are a hot upgrade)
But I am a lic FAA tech and used to rebuild acft maggies,, I got in trouble for saying that maggies are an inferior design. (Its a simple fact that the have low spark and power at start and low RPM and only really produce good performance at high RPMS.. IE: Good for a race bike, bad for the street). I was roundly ridiculed for this view point despite my point of redundancy and safety of modern EI ignitions. Years back I sent some ads and an article from Acft Mechanics news to some of these people showing the now common practice of EI Retrofit kits for many common piston type acft..