My idea was to add a socket to the case of the welder for a grinder power source (I will not be using both together), it is an old AC transformer welder. Everything appears fine but when I tested for continuity just to be safe when the transformer switch is thrown on it creates "short" on my live and neutral terminals in my socket (I have continuity between both) Is this normal? Added diagram

 

It is ok to add a socket on the mains side for your grinder. But if you are not sure of how to do it, get some help from a qualified person.
I've added in line sockets to a couple of power drills to save running extra leads. This allows me to have a couple of drills at work. One a drill and another a power screwdriver.

As for the continuity, the resistance of a welder primary winding will be quite low. So, is your "short" 0R or just a couple of ohms?

 

Just .5 ohms at the socket. I kind of thought that this would be ok, but i just wanted to make sure.

 

Is this before you worked on it, and does it still work?

 

It never had a socket on it, but sorry forgot to mention it has a 240v fan coming off that too!