As previously mentioned neither of those wires should be related to your non-starting issue.
Get a factory service manual if you do not already have one - you can find them online. Check kz400.com.
"It revs high and then dies" - check your rubber intake manifolds for cracks and leaks. If they are original they probably need replaced. Once you do have it started you can test this by spraying carb cleaner or other flammable spray around the intakes while the bike is running. If the bike revs up then you have leaks.
Test the two coils. You can find testing procedures in the factory service manual. Personally I'm not comfortable with 30+ year old coils, I would not buy a used one when you can get a new Emgo coil that works just fine for $40.
Clean the carbs - again. There was a saying on the old kz400.com forums that you needed to clean the carbs 3 times before they were truly clean. I can verify that that may be true - I had to clean my first pair 3 times. When you take the carbs apart pay special attention to the rubber diaphragms in the top of the carbs. Be very careful when removing them. After you have them removed hold them up to the light to see if there are any pinholes or larger obvious holes or tears. If there are any holes you will have to replace them. You will probably not be able to find NOS replacements and if you do they are made from the same 30+ year old rubber of the pieces you currently have. There is a place that makes replacements that I've heard good things about: I believe it is JDM industries. Check the fuel height in the carbs using the "clear tube" method. And sync the carbs - that will save you a lot of grief when trying to diagnose running issues.
You'll need more than one new pair of spark plugs. Buy a box (10 in a pack maybe?) of them. New clean spark plugs cure a lot of ills.
Check and adjust valves. It is pretty simple to do.
Check the compression. The bike should be warmed up to do that but you can do a cold check to get a rough idea. If you do not have a compression gauge you may be able to borrow one from an auto parts store like Auto Zone, Napa, etc.
You mentioned removing the airbox for pod filters. I would recommend putting that airbox back in place at least until you get it running and then you can start experimenting. If you do decide to go with pod filters, cheap pod filters (Emgo) are not the answer - go with K&N or Uni filters.
One problem with a cheap $300 non-running bike is that it is non-running for a reason, even if that reason is just that carbs are gummed up - otherwise if it started up it would be a running bike. The second problem (that you're already experiencing) is that parts and $$ add up quickly when turning a neglected bike that needs some TLC into a runner. New battery, inner tubes and tires are a given but things like brake pads, brake shoes, new cables (throttle, tach, speedo, clutch), intake manifolds, carb to airbox boots, carb diaphragms, petcock gaskets, several sets of spark plugs, coil and wires, points and condenser (not in your case), fork seals, maybe mufflers, perhaps shocks, etc usually all need replaced or at least some attention. Not to mention the additional specialty tools needed. That may not be a big deal for some people or you, I bought an old bike because I wanted to work on one, but for someone just looking for a rider it can be frustrating and false economy.