This time I moved the pressure switch to the other side of the stop cycle valve closer to the tank
The pressure switch always needed to be on the tank side of the CSV. You may have damaged your motor having the pressure switch on the wrong side for so long. With the pressure switch on the pump side of the CSV, the pump may stay running while the irrigation system is on, if the irrigation system uses all the water the pump can produce. But when you were using water in the house or just less than the pump can produce, the pressure switch on the wrong side of the CSV would cause rapid and numerous cycles. As Craigpump said, this is usually what melts down a pressure switch. Moving the Pressure switch to the tank side of the CSV should solve this problem.
The pump appears to be drawing too man amps because the two pump terminals are getting hot.
The motor has an internal thermal overload. If the motor were drawing too many amps the overload would shut off the motor. (Same thing if the capacitor is bad) These are auto-reset overloads, so it would have reset in a few minutes and restarted the pump, but you would have seen that happening.
The stop cycle valve may be causing it to run hotter at low GPM, or it's the capaciter or something I'm not aware of.
With the pressure switch located correctly, the CSV will keep the pump running as long as you are using more than 1 GPM. But this will not make the motor run hotter. To the contrary the restricted flow caused by the CSV will actually reduce the amperage of the motor, making it run cooler, not hotter.
But the rapid cycling that occurred when the pressure switch was on the wrong side of the CSV would certainly cause heat and melt the pressure switch.
Also a 1HP running on 115 volts is drawing the same amperage (pressure switch heat) as a 2HP pump running on 240 volts. This is the maximum amperage you can run in a FSG2 type pressure switch. It would only have half the amperage or heat on the pressure switch if you switched it to 240 volts. Nearly all jet pumps can be wired 115V or 240V. You would just need a double breaker in the panel for 240V instead of a single breaker as with 115V.