What would make the starter engage when the key out of the ignition

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Your problem seems to be a faulty solenoid. The solenoid is a little monster that lives on top of the starter motor, and its job is twofold. Firstly, it supplies full battery power to the starter motor, and secondly it drives a gear on the starter to engage with the engine flywheel.
Now, your problem. The first guess could be the ignition switch, but fitting a toggle seems like a fairy tale answer. Check the starter solenoid to see if there is a frayed wire on the thin wire that connects to the starter, or possibly a frayed wire on the battery cable that is shorting to the small connector. Otherwise, I have seen the terminal of this small wire actually become loose and turn in the direction of the battery cable, which is also connected to the solenoid. A short here will cause the problem you are describing.
Finally, the solenoid could have a short circuit inside the body, which means replace the solenoid.