YES!!!!!!! I figured it out!!!!!!!
You are not going to believe how simple the problem was. I am embarrassed to say the problem was not having the bolts installed on top of the crankcase. The bottom bolts were in and torqued to spec., but I had not put in the top crankcase bolts.
Tonight I split the cases, double checked everything, cleaned, fresh Three Bond, etc. When put the cases back to together it hit me, the bottom bolts were misaligning the cases slightly so the clutch would not spin with the kickstart assembly. Top bolts were added and now everything works like precision clock work.
I am owning up to my stupid oversight so no one else suffers this in the future.
The rest is downhill; cylinder head, timing, finish wiring, install rebuilt carbs, exhaust and fire her up!
Thanks everyone for your input and I hope I did waste too much of your time. Sometimes it is the simplest problem and you just need to walk away from it for a while, not think about it and the come back to it with a fresh mind.