Thought I had battery issues, but found this hole in the wiring from the battery to the alternator, wondering if this means replacing the whole harness system, and how I would know if the alternator is busted

 

I would not replace the harness over that, no. Pull the wire off and see if the copper wires inside are broken. If so, cut and crimp on a new connector. If not, just put some hot glue over where the insulation is broken for a nice water tight seal.

 

Are you sure it’s not supposed to look like that? Hard to tell in the pic but it seems like the connector that’s crimped there is designed like that.

 

That's exactly what it looks like to me too. Normal part of the crimp piece on the terminal.