Thanks for all of the suggestions. I will work on getting the threads cleaned up the best I can. My pullers look good but a high quality one is the way to go.
Another note. I am kinda of surprised that there is know spark. Looking into the cutouts with a flashlight it looks very clean. The frame looks like it was powder coated. Is it possible that the engine is not grounded to the frame. I did scrap the paint off at the coil mount but the engine itself might be isolated? Does the engine need to be in direct contact to the bare frame? There is an another black wire farther down the bundle that looks like it needs to go to a ground. Do I need to connect this to the frame somewhere? thanks so much for you help. I feel that I can do this.

I believe the wire you are talking about is the test point, if you ground it or you wont get a spark.
The engine will need to ground to the frame somewhere, removing the powder coating at one of the engine mounting points should do it.
The same applies to the coil mount.
You could check continuity from the engine to the frame to see if it is already grounding and also for the coil.

I will do that ASAP. It is hard to figure out the history of this bike. The frame and engine numbers match. It shows very little evidence of much operating time but it has been stripped and mess with quite a bit. I got it from a bike bone yard in Pear blossom CA.

Try cleaning the points contacts if you haven't already. Often, that's all that's needed. Can be done without removing flywheel.

With the nut and washer removed, is there enough room to get a thread comb on the end of a good thread file in there?

Please stop trying to make such a big deal about this. First of all the crankshaft threads are buggerd up because someone previously tried to remove the flywheel without a flywheel puller. They pried on the flywheel while hammering on the crankshaft. On this job, first you need to remove the nut and the washers. Use a magnet or two to get the washers off. Then thread your puller on (it threads onto the flywheel, not the crankshaft) and remove the flywheel. Once you have the flywheel out of the way you can clean up the threads with a thread file. Easy peasy! Thread files are available from a Snap-On tool dealer.

When I was 15 I worked in a go kart and mini bike shop. Our go to method to remove flywheels was to slide a pry bar behind the flywheel and apply pressure while hitting the end of the crankshaft with a hard rubber mallet. This would always pop the flywheel off the taper. For safety, thread the nut on the end of the crank to protect the threads. Might be worth a try if all else fails.

I removed many a minibike flywheel like jGersh described. Also, more recently on my barn find Rt1, the flywheel came right off due to a corroded taper. I was ready for a fight and it popped right off LOL.

I would not recommend the lawnmower engine "pry and smack" technique on a Yamaha.

I've seen it tried. Flywheel did not come off and case was broken.

One use for a cheap puller if all else fails is to weld it into the flywheel. That I have done as a last resort.

Jaw pullers inside the windows almost always damage the stator coils... sometimes irreparably... and a jaw puller won't fit between the case and outside of flywheel.

Kenny you beat me to it, those are very handy thread files.