The bike ran and shifted fine when I got it. After a year or so of riding around town on weekends things changed and while accelerating in 3rd at about 3,000 rpm the bike seemingly slips out of gear and revs wildly higher until you let off on the throttle and it drops back into gear. All of the other gears work as they should. I’m hoping for a diagnosis and/or recommendations to repair the problem. Note that replacing the clutch discs did not fix the problem. Thanks much, RJ

Are the clutch springs within spec? Does it only do that in 3rd gear at 3k rpm, or does it occur in other gears?

3rd gear always suffers from dogs wearing rounded & ramped at the edge, which ends up wearing the selector through holding it in gear until it gives up, which is the stage you're at now.
So my guess from experience is you'll need two gears plus selector & could likely need the selector drum too if the high point of third gear selector track has worn bad where it's held at when fully in third gear.
If that high point is badly worn off you end up with less engagement.
5th gear is a bad one as well, so look closely. I'll put a link up to what gears I think you'll need.
As usual I'm happy to be wrong but I'm over standing in the bad boy corner lol.

#22 & #23 in link below.
www.partzilla.com/catalog/yamaha/motorcy...1c/transmission-gear

Also below we have Selector #2 & possibly Roller #4 if broken--as i used to break the roller so fitted the later solid pin. 
www.partzilla.com/catalog/yamaha/motorcycle/1970/dt1c/shifter-a
Unlikely it 'is' broken but if it is it'll be your main issue which would have helped the rest to wear out.

At worst #8 selector drum itself if badly worn at the high point where pin for selector #2 runs in the drum grove--where it stops at its highest point for 3rd gear engagement.
If you have the 4th-5th selector removed from the drum then look close at 5th gear high point plus the dogs on gear #7 & #5
I need a drink after that!!.

On a brighter note--if you're sprocket nut is about to fall off then that would let the shaft move over & potentially let the output shaft with 3rd gear move away a little.