Well, my loving wife and I had a chat over a nice dinner when I took her out to one of our favorite places a couple days ago. The subject of the 1200 came up(from her), and she simply told me she had never seen me give up on any project I had ever started. Granted, a few times it took longer than either of us expected, but I never quit and dumped the project....whatever it was. And, as wives often are....she was right on target, I hated the thought of dropping the entire thing. So, after a couple days I adressed the situation again, and things went rather smoothly. The first time I split the cases it took me quite a while since I was learning what was needed to be done. This time....15 minutes tops. If you recall I spent many hours trying to reinstall the pistons the first time around and got quite frustrated, and again it was a learning experience. This time....got it on the third try. But I digress, I did find out what was hitting and causing the sound of gear teeth ticking against something. I'll try to show it with pictures and it has to do with the shifting mechanism, both internally and externally. Had I known then what I know now, I wouldn't have needed to split the case the second time.
As you probably know, the lever in my hand engages the ratchet mechanism each time you shift. The post I'm pointing to is supposed to be straddled by the two narrow fingers just in front of my thumb. However, the shaft that the large spring is mouted on will move in/out just enough to cause that clevis arrangement to disengage as you see in the picture.
This is how it should look.
When that is disengaged as shown in the first picture, it will allow that shaft with the large spring to turn, thereby disengaging the small "knob" I'm pointing to. The small "Y" shaped arm to the left is supposed to straddle that knob...which is supposed to be pointing straight down. If the outer arm is disengaged, that shaft will turn in either direction more than enough to separate the internal "Y" and "knob." In my case, that small "Y" doodad was pointing the other direction and the main problem was actually the gears hadn't been allowed to fully engage. I'm guessing the synchros were just touching as I turned the crank. What ever it was, it was a heck of a sound.
By being certain that large shaft is all the way in, and the outer action is straddling the post, you can reengage the internal "knob" and "Y" by turning the shifter arm by hand(the arm your shift lever attaches to activated by your toe), lower/turn the large shaft the knob is mounted on and you can roll the two inward together. They will now be set up to activate the external ratchet shift mechanism. This is how the shift mechanism should look internally.
I realized how it had happened the first time around. The ratchet arm was hanging down and while I was struggling with reinserting the pistons, that arm got bumped enough to disengage the spring loaded ratchet arm from the outer post. Not knowing what had been done, I manually shifted(I thought) the unit by loosely attaching the arm your toe engages. It didn't feel right but did make a "shifting" sound....then when I turned it over by hand is when I got the noise. Needless to say, my spirits sank. Had I known what it took to fix the problem externally, I wouldn't have needed to open the case again....now I know! So, when it came time to start reinserting the pistons, I zip tied that outer arm in place so it wasn't hanging down and wouldn't be disengaging anything. After I got the pistons in, I pressed the case together without any sealer just to test it. It shifted fine, no gear noise, all's well that ends well. Raised the cases enought to spread the sealer, lowered the case again and bolted it down. Now, with the outer shift arm mounted I can shift up/down through the gears, all works fine. As you can see, the engine is pretty clean internally, I didn't wipe it down except to soak up some old oil. Hope this will help someone in the future, if nothing else at least alert you what to watch for. Now to order some gaskets and put this fool thing together.
Some people's kids.
Maybe I'll find a running bike for a decent price and rework it, however it's not what I had in mind originally. Discouraged? Yes! 
