The arc is firing. It is doing something I haven't seen before. But this is not supposed to be operated like this, if it has been. The pilot arc is NOT meant to press and hold indefinitely. It is only for a fraction of a second to start the arc.
The gap is .035" on that unit. The face on the nozzle looks like you have been doing piercing, in turn melting the cup. IF the arc isn't eased into the metal at an angle, the blowback that is created will splash back on the face and melt the high temp composite. The damage you have appears to be a classic sign of this. The pilot arc will jump erratically if the nozzle is cracked or worn. Honestly, at this point it's hard to tell if it's the chicken or the egg that came first.
And you do have it on DC- right, and not switched to AC? What about the dryer?
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