The string gasket would be inside the flange on the cylinder head. Using a needle I couldn't find anything in there, so that's why I just used orange RTV. I made sure it was packed in to the flange, and let it dry for a few hours then put the pipe on, and as I said sort of "caulked" it in. I also put new springs on it, and the old ones were a little bit weak by comparison to the new ones.

I've put about 30 miles on it since and the RTV seems to be holding up well, and has cut down the noise a bit. I think I really got the RTV cured well by placing a heat gun on it for a few hours the first day, then a few hours more the next day.

By the way, in that picture of the end of your exhaust, do you not have the deflector?

  

I checked inside the gap in the manifold with a pick and found just half inch piece of string.   

I took off the deflector out of curiosity. I later took out the baffle to see what it looked like. 

Is the string packing intended to be reusable?

"Is the string packing intended to be reusable?"

Yamaha still supply it (in a fixed length of more than is required) and it is as cheap as chips.
 

quick follow up:

1) replacing the string packing solved the top speed engine stumble and the oil spray.
2) I got better getting the bike to move from a stop light/sign with more practice. 

thanks to all for the assistance.