I bought a bike in very similar condition to yours including the cracked case where the chain had jumped the sprocket. When stripped, I noticed the casing was pushed in and touching the gear. I knocked the case back to shape and welded up the crack. After rebuilding the engine and doing a couple of short runs I was initially very pleased with the bike but I noticed a random knock and with it the chain would snatch, but only when the bike was on it’s side stand. There is a snap ring/ circlip on the shaft which if fitted the wrong way round gets dislodged and allows the gear to float up and down the shaft. My problem however turned out to be a spacer washer between the gears missing on the same shaft. It has the potential to engage a gear and lock the engine up or even engage a gear while the bike is idling on the prop stand with disastrous results.
