kz650 stuck in neutral

Need some advice! I just finished swapping in a (new) 1977 kz650 engine and got the engine running last night. The shifter wont go into gear, it seems to be in neutral. The shifter lever moves up and down about 1/2" each way. I have tried clutch in/out, rolling the back wheel while trying,, still in neutral.

I purchased the engine from an enthusiast who had it in his back shed for a few years, but kept it oiled and in decent shape. The thing fired up quite nice, so I'm hoping the transmission isn't frozen. Any ideas on where I can look first?

the first thing I would check is the clutch adjustment if you are having any issues with the shifter. Page 216 of the 1976 kz650B factory service manual has the troubleshooting steps for "Doesn't go into gear" listed as follows:

1) clutch not disengaging
2) shift forks bent/seized
3) gears stuck in shaft
....

Good luck!

Are you trying to shift it with the motor not running? These will not shift correctly without the engine running or the rear tire spinning. Spin the rear tire then try and shift it.

Took the clutch cover off, clutch looks to be operating normal. i have tried to shift with the motor running, and by spinning the rear wheel. Kick start works, way to know without pulling the whole thing out and splitting it apart?

Did you try a basic clutch adjustment?

Ok. I have tried basic clutch adjustment, nothing. So i took apart the clutch, I had a new clutch so I installed that. Took the shifter/ output sprocket cover off, and the shift drum doesn't move at all. sprayed it with kroil and am hoping it moves tomorrow. If not, I'm lost