Show that a subset $X_j$ of the unit circle with $j$ distinct points removed, has exactly $j$ path components ($j \geq 1$).
I can visually and intuitively see why this is true, but am having trouble providing a more exact explanation.
For $j=1$ it is obvious that $X_j$ will still be path connected.
For $j = 2$, say the removed points are $r_1$ and $r_2$. Then we will have two paths, say $\gamma_1 : [0,1] \longrightarrow X_j$ which connects points in $X_j$ from $r_1$ to $r_2$ clockwise around $X_j$ and $\gamma_2 : [0,1] \longrightarrow X_j$ which connects points in $X_j$ from $r_2$ to $r_1$ clockwise. (Here by "from" I mean points in $X_j$ arbitrarily close to, but not equal to $r_1$ or $r_2$). These functions must be paths since their respective images are subsets of the image of $\gamma_0$ where $\gamma_0$ is the path connecting points in $X_1$. Hence $X_2$ has 2 path components.
Now for some $k > 2$, the removed point $r_k$ from $X_k$ must necessarily be between some $r_x$ and $r_y$ removed from $X_{k-1}$ since the removed points are distinct by assumption. The path connecting points in $X_{k-1}$ from $r_x$ to $r_y$ will now be discontinuous at $r_k$ and is no longer a path in $X_k$. The removal of $r_k$ now creates two paths, say $\gamma_x$ from $r_k$ to $r_x$, and $\gamma_y$ from $r_k$ to $r_y$. Hence $X_k$ will have 1 more path component than $X_{k-1}$, so therefore if $X_{k-1}$ has $k-1$ path components, $X_k$ has $k$ path components.
The result that $X_j$ has exactly $j$ path components for $j \geq 1$ follows by induction. $\Box$
Does this proof contain any errors? How can it be made more precise?
Your idea is nice, but it is not properly elaborated. In fact you say
One can understand what you mean, but it is rather vague.
I suggest to do it as follows:
$X_1$ is clearly homeomorphic to the open interval $(0,1)$. Let $h : X_1 \to (0,1)$ be a homeomorphism.
For $j > 1$ we have $X_j = S^1 \setminus \{r_1,\ldots,r_j\} = X_1 \setminus \{r_2,\ldots,r_j\}$, thus $X_j \approx h(X_1 \setminus \{r_2,\ldots,r_j\}) = (0,1) \setminus \{ h(r_2),\ldots, h(r_n)\}$. But now you can easily show by induction that $(0,1) \setminus \{ h(r_2),\ldots, h(r_n)\}$ is the the union of $j$ disjoint open subintervals $I_k \subset (0,1)$. Each $h^{-1}(I_k)$ is a path component of $X_j$.