so we ordered all the parts. probably spent no more than $400 on everything. had to get a new sprocket, chain, gaskets, seals, found a transmission on ebay with 4k miles on it, in perfect condition for $100, and other random parts that we needed.
Didn't have toy much trouble tearing the engine down, went pretty smoothly. 2nd gear and 2nd pinion gear were just torn to shreads along with the drive axle being bent. The inside of the case had nicks here and there, but nothing too serious. The engien block was busted, where the generator goes. Put some JB weld on the outside of that, and it seems to be holding up well.
I will tell you, it PAYS to be organized, and that is something we are not. The alcohol didn't help either. We had parts all over the house, and it seemed like every time we were missing a part, it was a washer. We even had to wait a few days, because we had to order a part that we couldn't find.
But we got the bike put back together, even had a guy repaint it for $100, since we had it all apart.
Now the only problem we are having is there is water in the engine somewhere. You can see a milky looking color in the site glass. First we found that one of the seals fell out of the water pump, replaced it. Still the same thing. The oil has been changed FIVE times (we get oil for free from my dads shop) and it still has that milky color to it. I'm sure we're just overlooking something...
What else can we do. Pleeeeeeeease don't say we have to tear the engine apart again, I don't wanna do that for a long time.