My first thought: it sounds like you've been riding dirt bikes before: they usually have a kickstarter that allows you to start by pulling in the clutch (while stuck on a hillside, holding the brake with the other hand).
When the 500's clutch lifter has gotten worn (usually from lack of grease & care by the riders before you), the disengagement point becomes "touchy" to proper adjustment.
So, try this method to "sneak up" on the sweet spot (or else just get a new lifter assembly and replace your worn one):
1. Adjust the cable adjusters to full slack, i.e., turn them all "in" to start.
2. Turn the adjuster at the handlebar lever to be 2 turns out from the "full slack" position.
3. Grease the clutch lifter on the engine case before this next step. Then, adjust the clutch lifter by loosening the clamp screw, then turn it until you feel the beginning of resistance, then back off just a little, about 1/16 of a turn. This "resistance" is the lifter's cup pressing against the lifter shaft, and you need just a bit of slack in between them for "elbow room" during this setup. Tighten down the lifter's clamp screw.
4. Now, pull on the clutch lever. There should be about 1/2" to 3/4" slack, measured at the outside arc of the end of the lever. It will probably be more, since your system is worn somewhat. If it is, loosen the lifter's clamp screw again, and tighten that lifter up a bit, and try again. Repeat this until you have the required end-play on the clutch lever.
5. Now comes the "worn tuning" part. Adjust the cable's end adjuster at the crankcase for this part. Extend this adjuster until the slack at the handlebar is only about 1/4" or so. Take the bike for a short "shifter test ride", long enough to heat the bike up, and see how much the shift point moves. It will move "outward", where the clutch engages later with the lever further out, when the engine is hot. This adjustment point can be compensated with the lever's cable adjuster, which is the reason it is there: on cold days, you will find you may need more slack, and on hot summer days in heavy traffic, you can use this to "shorten up" the cable's length a little to keep the engagement in a likeable spot for you. This adjuster should look very used on a bike, or else the owner does not understand its function, or only rides in a narrow temperature range...if you cannot get an agreeable engagement point by using this handlebar adjuster, then you must tighen up the clutch lifter on the engine case a bit more, then test again. DO NOT attempt to adjust this lifter point further with the cable adjusters, or you will overcenter the lifter, requiring full disassembly to reset it inside. You might find, in the end, that you are snug up against that "resistance" you feel when tightening the lifter, just because of the wear you have in that old lifter. This is OK, so long as it is not so snug that it lets the clutch slip when the lever is released.
Over the next 1000 miles or so, you will have to repeat this lifter adjustment at the engine case, because the clutch plates will wear a bit while they settle in. Again, DO NOT attempt to fix it up with the cable adjuster on the engine case, or you will overcenter the lifter. Simply loosen the clamp screw and snug up the lifter adjuster. You will then find that it has a much more definite feeling to it than it will have today, because the plates are more aligned then, in the clutch.
You may want to print this out, take it to the bike, and play with it there: you'll get it after a few "feely" attempts. It works out fine, even with worn lifters, unless the old one is so worn that it "stops" against a raised, worn edge when lifting beyond a certain point. If yours feels like this, then you will have to replace it, as there is a groove worn into the lifter itself from lack of previous maintenance.
When the 500 transmission wears, some slack gets introduced in this lifter-and-shaft mechanism inside the crankcases, making for a "wandering engagement point" for the clutch. The problem can be fixed up by replacing the spacer washers on the mainshaft and countershaft in the tranny, then replacing the clutch lifter in the side case. In the worst cases, the tranny ball bearings also need replacement. This restores like-new performance. Greasing this lifter is critical to keeping that performance, and almost no owner I ever saw (except my brother) greased them. His lifter went 80,000 miles just fine, while I routinely replaced them on most customer's bikes at about 25,000 miles for the problems you describe. The 500 tranny is good for 100,000 miles if the spacers and bearings are replaced at about 40,000 to 50,000 mile intervals. If not, the shifter forks suffer wear from the shafts moving back and forth with each clutch pull-in.
