I totally agree with your assessment. It’s basically rubish.
I believe that is the nav light switch. If you look at the back of your panel, the nav light switch is supposed to be a DPDT switch. The nav light side is wired up in a simple on / off setup. The other side is setup with the (I believe) power side of the gear indicator lights. If the nav lights are off, the lights get 12V, but if the nav lights are on, the other line is hot, which runs to a biggish resistor in line, so the lights only have ~10V (on memory) and are a bit dimmer.
It’s possible when I had to replace that wiring, I didn’t include the dimmed side and always drive 12V to the lights. If you’re going to use LEDs, you definitely don’t want the resistor circuit. Whole thing seemed hokey and unnecessarily engineered to me...