From what you just described, it sounds like the pressure plate isn’t pulling away far enough when you pull the clutch lever in (when springs installed). Wish I could be there to see it; not sure what else to offer in advice.
Edit: I see you’re in Houston - what part of town are you in? I live down in League City.
I'm kind of by the galleria. I'll try putting a little more tension on the clutch cable and see what I can get to happen. It hasn't been ridden in a long time. Could that have something to do with it as well?
 
That really shouldn't be causing the problem you're experiencing. The pressure plate shouldn't have to move much to let the clutch slip. I just can't picture what else (other than what we've discussed) that could be causing this problem. Your idea of letting it run in neutral for a while and maybe pulling in the clutch lever while it's running might have some effect.
 
That really shouldn't be causing the problem you're experiencing. The pressure plate shouldn't have to move much to let the clutch slip. I just can't picture what else (other than what we've discussed) that could be causing this problem. Your idea of letting it run in neutral for a while and maybe pulling in the clutch lever while it's running might have some effect.
Any recommendations on oil? Like a thinner one? I had 10w40 in it, maybe I needed more or less oil? (I filled until it came out if the bolt hole)
 
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I’ve always run Bel-Ray light 80 wt in transmission of my CR500s. 10w - 40 should work. Most any 4 stroke trans oil should work also. I’m not familiar with that specific bike, but most 2 strokes had bolt hole/fill level and you filled until the oil came out with the bike setting level like you said.
 
I’m having the exact issue described I’ve looked at everything and all looks fine, however I am able to get the clutch to disengage when I pull the clutch in and rev it in 1st, although I have to really rev it out for a while before it decides to free up, this is with fresh plates and new oil no basket grooves and good tension on the lever, I Have no clue why it’s doing it, I bought the bike like this.
 
I’m having the exact issue described I’ve looked at everything and all looks fine, however I am able to get the clutch to disengage when I pull the clutch in and rev it in 1st, although I have to really rev it out for a while before it decides to free up, this is with fresh plates and new oil no basket grooves and good tension on the lever, I Have no clue why it’s doing it, I bought the bike like this.
If your not already using a light oil, I would switch to one. I use 5-30 in my RM 250, or try ATF which I’ve used before. And re check your cable adjustment. I’ve also seen a too high idle cause clutch engagement problems,
 
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