Originally Posted by got_nitro

Well, thats either your mesh on the clutch bell (pinion) and the Spur gear or the CB bearings (clutch bell bearings) are bad.

Can you get a close up pic of your "mesh" and (spur gear and CB gear)? It might even be a bad spur gear.

Can you take the engine out? Take the 4 bolts off the bottom of the chassis, take the fuel tube off the carb nipple and pinch it, other wise it will leak fuel if theres some in the tank, take the bolt off the chassis that holds the pipe onto it, pop the linkage off the throttle horn and your engine is out.

Does it have play in the clutch bell like a bearing is bad? Look for metalic fragments around the chassis where the clutch bell lines up.