There is a neutral switch on the bottom of the transmission, near the rear engine mount on the left side with 2 wires that go to it. If you have a break in the wire(s) or they are pulled off, your neutral indicator will not light (assuming neutral indicator bulb not burned out or miswired), These switches also can have a habit of breaking. There is also a diode (either hidden inside the headlight or else wrapped up in the wire harness) between the clutch engagement switch (at the clutch lever) and the neutral switch, so that either one going to ground will ground a pin on the starter relay and allow the starter to turn when the button is pressed.
If you neutral light doesn't work, but you can start the bike with the clutch lever pulled in, at least part of the circuit is still working. You need to determine if it is a bad wire connection or bad neutral switch (and/or bad bulb) that is causing your neutral light not to work.
I'd recommend getting a HAynes manual to further aid with your routine maintenance on this bikes. They aren't hard to work on, but they are different. Each manual has its strengths, and weaknesses. And both have some errors & omissions, too.
The starter might be binding up when things get hot - no one bother to check on them and do the routine/periodic cleaning of the starter bendix gear assembly every 10-15 years or so. The grease hardens and with dirt and grime, can bind up. Or you might simple have a loose connection in the relay circuit, or down at the starter motor itself (under the top cover on the engine. The BOSCH starters also aren't the most efficient starter motors, but they are very rebuildable, and there are aftermarket replacements if it really needs to be replaced. Chances are that it just needs some attention/routine maintenance though.
If the VIN/frame serial number indicates you have a 1979 bike, chances are that is what you have - many parts are interchangeable or retrofittable with no or slight modifications. Check for a serial number on the engine near the oil fill hole and tell us if it matches the digits on your frame serial number on the right side near the steering head.
1998 Kawasaki Concours, 1982 BMW R65LS, 1978 BMW R100/7
nhmaf screwed with this post 09-25-2012 at 08:26 PM
Reason: add starter motor info