Meant to add that looking at my pics that this is 5th gear. But is exactly what can happen in third. Happy to be wrong in your case & hope its a simple fix.

Wow guys, thank you all so much - thats all amazing info and detail. I especially appreciate the images on what to look for, I'm no engineer nor mechanic so some of the terminology is more baffling than buddhist scripts.
Apologies for the silence too, work and life got in the way.

I will update once I've gotten everything out and looked at / covered in ink etc

I must've missed the ink story sorry. Just inspect everything closely & we look forward to your findings.

Quick question sir.. Countershaft Sprocket - that is the Drive or Front sprocket yes?  I've not seen it called that before. 

 

Yes. I must admit i call it front sprocket as well. But it 'is' mounted on the countershaft--which i call the output shaft. Main shaft has the clutch hung on it--i probably call it the input shaft. But now i'm confusing myself & anyone reading it haha. You're all good--carry on. We all use different terms but we all get there in the end in a roundabout way.

 
Another detail to share please. When I stripped the clutch side of the box, too look into the kickstarter (which was the issue the broke the back of the end of the season) I found that the idler gear was loose, and in fact where it mounted was busted clean off. I had assumed this was a free running part but looking at Mr Clymer's books this is at the end of the drive axle (counter shaft) in the gearbox?

So apart from being a stand alone pain in the arse, could this contribute / cause the drive problem?

I have a picture if I can work out how to upload it

"I have a picture if I can work out how to upload it"

Such a good picture, you uploaded it twice! 

Not your fault, a quirk of the system. To get round it, insert any picture individually, instead of "insert all".

Gosh, golly gosh, she's #$$$%%^% in dire straights. Gotta come apart that's for sure. Look forward to updates. Just expanding the pic up big the hardening on that big washer looks compromised. Hows the flat needle bearing looking.

Hey. Just had a chance to properly look at it , the bearing is shot.
I notice the shaft (clutch) has a considerable amount of float in and out. 

I'm assuming that's not a design element?

I should be splitting the halves later today. 

Clutch shaft having end float without the baskets, spacers, shims, and thrust bearing and retaining nut installed and tightened is normal.