Transmitter is on.. When its off I can recive fine...
Ah, you didn't say that.
Transmitting puts out a lot of energy. If you have a bad SWR, all that energy gets reflected back into the transmitter and bad things happen. I have seen plates melt in vacuum tubes, arcing like you are getting, and even connector fusing.
disconnect the antenna from the transmitter. If you can get ahold of a 50 ohm load, do so. A dummy load is always nice to have around. Try connecting the dummy load and see if it will load ok.
Second step. Take an ohmmeter and check across the center connector to ground. It should show an open. If shorted, you have found your problem. Check both the antenna and the coax. I have found more problems with bad coax joints.
If the open test is OK, repeat, but short across the coax at the antenna end. Does it show shorted? If not, you have a cold solder joint somewhere in the co-ax.
If this all checks out OK, look at the section of the manual that talks about peaking the final amplifier stage. There is generally one, or a pair of adjustments you make by alternatingly dipping and peaking the final tank circuit. Failing to do this will cause exactly what you are seeing.
Finally, double check the antenna length. Use an SWR bridge if possible.
Try all of that and get back to us.