I worked at the Norfolk & Carolina Telephone & Telegraph Companies from 1980 to 1990.
The grounds are NOT connected together in the phone EXCEPT as follows: All the A lead grounds are common and run from the phone to the KSU on the orange/white wire. Each lamp ground LG lead runs seperately from the phone using one wire for each lamp. Since the hot side of the lamps are also seperate wires, the lamps end up being connected to a pair for each lamp, requiring a full pair for each line. The lamps run on 10 volts AC and should be on a balanced pair to prevent any hum from being inducted to a talking pair.
The next wire down is the A lead. It is simply a ground applied to the lead at the phone to operate the A relay in the 400D line card. Notice it goes to ground through three series switch contacts in the phone. These are configured so that when the phone is off-hook and the line is selected, there is a circuit from ground to the A lead. One is the hook switch and it goes open when you hang the phone up. One is the line select key and it goes closed when that line is selected. The last one is the HOLD key. It is normally closed. The HOLD key is a momentary key that is mechaniclally interlocked so that when you push it, the lead goes open and when you release it, it will mechanically cause the selected LINE key to release. This TIMING consisting of opening the A lead and THEN opening the talking pair (T & R leads) causes the line to be placed on hold.
The AUD SIG also runs on AC (10 or 18 volts 60 Hz, or 105 volts 30 Hz.) so it requires a balanced pair too. There is only ONE audible signal per PHONE so only one pair per phone is required. Leads R and RG usually are on the yellow/slate pair (pr #20).
If there is a ringer it will run on the 105 volts 30 Hz signal. There may be a low voltage buzzer if there is an intercom. It will usually run on 10 volts 60 Hz.
This is a very simple introductory explanation. The 1A2 is incredibly flexible and can be wired to exactly suit the individual needs. Nothing has to be exactly as shown in the documentation, but a thorough understanding of the principles as outlined here will keep you out of trouble and allow you to troubleshoot the system. The best piece of test equipment is a 24 volt lamp with alligator clip leads.
Also refer to the terminal block layout for the KSU. This is similar to any Western Electric or ITT unit and several others. The 400D line card schematic is sheet 4 of 4. The San-Bar line card plugs into any WE or ITT or AE KSU so it shows the functions of any of them. The 2564 telephone, page 2, is a similar to any ITT, WeCo or AE phone.
The ITT 400E line card provides for music-on-hold on pin 3. It is designed to work with another card containing 6 isolation transformers (repeat coils). The SanBar 4200E card has music-on-hold but still needs a balanced transformer feed. There are other ways, for instance on a 400D card, you can replace the hold resistor (probably R1) with a transformer winding. The transformer type is not critical but it is necessary to get a balanced, ground isolated music source. You might use a 600 ohm winding for R1 and hook a 8 ohm winding to the music source. When connecting more than one line, a resistor in series with each transformer on the 8 ohm side will attenuate the talk path from one on-hold line to another. Try something around 470-2200 ohms.
Intercoms can be simple push-a-button-and-ring to dial dozens of stations. Usually a single talk-path is provided. The WeCo 207C dial selector provides pulse-dial intercom and the WeCo 247B provides Touch-Tone. (There is a WeCo 247A but it responds to voice quite a lot.) The Valcom V-1109 provides a hands-free talk-back intercom using a 45 ohm loudspeaker at each station. Some pulse-dial intercoms use stepping switches. Some use binary tree counting chains. Some were even solid state for DTMF. There are many different dial intercoms and most can be adapted to other special functions like releasing a door lock. The WeCo 207C with a bunch of 211 bracket phones provided the command at a large navy base with a non-blocking interoffice intercom without using key phones. Such an intercom could even be configured to ring a station that was left off hook. There were a few other 1A miscellaneous relay modules employed to build this special configuration. The point being that the dial intercoms can be used without a key system. I am even using a 207C as a first selector in my Strowger setup. Two extra relays were required and I can dial 5 for the Strowger connector or 4 for the Valcom talk-back or 9 for an outside line.