I had this issue recently. Tried a few different (used) switches, all with the same results. The o-ring is borderline too fat for this location, and there are a couple of subtle tricks to getting the switch to fully seat. The first trick is to place the o-ring in the lower case first, then insert the switch. This helps prevent the o-ring from bulging out or hanging on the lip. The second trick is to lightly tap on the switch as you snug down the retaining tab bolt. Just a couple light taps with a small block of wood as you snug the bolt is plenty, don't get too aggressive with this, those switches ain't cheap.
One last thing is to check the diode. In its stock position it hangs off the back of the battery box. My diode failed and the neutral light was always on. A quick check for the diode is to put the bike in gear with the key on (does not have to be running). If the neutral light is on, with the bike in gear, does the light go out when you pull in the clutch lever? If so, you likely have a bad diode.
