In 3rd gear it will grind and kinda sound like the clutch is slipping. Would this be a shifting problem or a 3rd gear problem? The local dealer said that 3rd and a couple other gears because when one gear goes bad it weakens the others. It's hard to diagnose because i am discribing this through a friend.
Move = spin? or in and out? Sounds like there might be some broken teeth somewhere. Just taking pot shots here. I did see an interesting article on the net that showed how the different gears meshed up to give different drive ratios, and it involves several cogs on two different shafts. I'm thinking that if it only does it in 3rd, that splitting the cases might be in order. I'll take a look around for that site and post back here in a few minutes. If I'm not mistaken, the parts used in the photos were XR parts, too. XR600/650, I think.