i'm gonna be no help here, but since you've opened the cases, take a good hard, long look and see if anything looks odd, questionable, or outa place. go over it piece by piece, WITH your service manual, and make sure you understand as much about its operation as you can at this point.
when you've finished, step away for a period of time, (get your brain thinking about something totally different), get a cup of coffee, take a break, and then come back and repeat the process again.
..also, that sounds like really good advice mgab...see what you can see without the goal of finding anything wrong...maybe it will reveal itself...maybe its alright. I know easy for me to say after what i found.
I actually spent about half an hour yesterday shifting gears around, trying to understand how the gears and forks work together. I looked closely at every dog, every tooth, every fork and every everything... nothing jumped out at me. I'll repeat the process again and maybe something will leap out and slap me in the face.
It's hard to see 0.006" by eye, get a feeler gauge. You'll want a set later on anyway for things like points gap and valve clearances.
I'll go ahead and get a feeler gauge after thanksgiving and see what the plates are at.
Actually the passage you posted implies that, since your problem occurs when shifting from first to second, the problem should be in the transmission. It's still possible that it's a clutch issue but that's what I take from your stated symptom and the quote you posted.
My issue actually occured in more than just first to second. For the few miles before I realized the depth of the problem it had a hard shift going into every gear. I didn't try fifth as I was only on city streets but I got up to fourth. The hard shift seems most apparent from neutral to first and first to second but was there to a lesser extent on three and four. I think, the last time I rode it was over six months ago.
Shifting into first gear into second involves the movement of the C5 gear (see pic) which is the job of the left-most shift fork, so focus your explorations there. How do the shift dogs on the side of the gears look, btw? If the corners of the dogs are rounded off that can cause poor shift action as the dogs tend to bounce off their engagement slots rather than catching and sliding home. It's hard to see the dogs in your earlier pics.
I haven't noticed any abnormanl wear or damage to the dogs, I'll have to take another look to be sure. Should I take some pictures of their condition? It's kind of hard to see the whole left-most fork while still engaged with the gear shaft, should I remove the gears for closer inspection of that fork?
Regarding your neutral light issue, have you tested the neutral switch? Pop it out of the engine and check to see that the actuator ball moves freely. Measure continuity between the switch body and the screw terminal, you should have continuity when the ball is not pushed in. If that looks good than it's possible the light is simply burned out.
It's hard to imagine a gear problem that would directly affect the neutral light.
I actually pulled the switch out of my donor bottom end and the one I'm trying to fix. I think the root of the light may be the switch. The operation was somewhat rough and sticky compared to the donor switch. The donor switch is a little shinier and moves quite fluidly.
As others have said, if nothing else the practical knowledge you've gained by getting inside the engine is priceless so look on that as a silver lining.
mystic_1
Oh for sure, I'm not really regretting this decision yet, I'm actually rather excited to be learning so much about my bike. It's just mildly frustrating to have any sign of trouble completely escaping my grasp. You know? It's like when you lose your keys and you know that they're somewhere in your house, but even after you've covered every inch of your house four times you still can't find them... That's me right now, frantically running around going "Where the hell are they?! I know they're here somewhere! What the hell?!?!?!?!"
