As long as it spins, it should be ok.
I think there's enough clearance and engagement, it doesn't matter which way it's on.

check that you're getting power to the starter with a voltmeter.

it could be that the relay is stuck, use a plastic hammer or screwdriver and give the fender a couple of raps right below the ig switch to free it up.

Alright I know zero to nothing about these multimeters, but the guy I borrowed it from told me to test on the setting shown in the picture for a 12V battery. I still have it if I need to do more with it.
With the ignition off, the battery read 26.1 and starter read 0.00
With the ignition on, the battery read 25.5 and starter read 21.6
I also tried hitting the fender with the handle of a screwdriver with no effect on the cranking. What do I try next?

Second time's the charm. On this setting I got these numbers:
Ignition off: battery 12.34, starter 0.00
Ignition on: battery 11.95, starter 9.92

projectfj wrote on 03/12/15 at 15:39:50:

Is that Ig on, starter ON ?
and where do you have the probes?

in that cofig it should be 0 at the starter . zip tie the clutch back and the hit the start button should be around 12v .
i am guessing bad seloniod and if it has been feeding the starter with voltage as it now appears might have caused damage to it  .
also sounds like the battery needs charging.

projectfj wrote on 03/13/15 at 08:40:08:

Ig or power is a switch/key
starter is a button

Understand about not having enough hands, but she never said that.  

So you're using the red probe to check the bat voltage and the starter voltage.
and yes, starter should be 0 in both cases.

potentially you have a bad relay and a bad starter.
or you've measured wrong.
Oh, and you can have a bad decomp controller, that's another reason why you can have volts with button off.

If the starter has volts, it should be spinning.  you said you tested it and it was good.
jump the battery positive lead to the starter terminal and it should turn, if you have the ig on, might start, so have it in neutral.

if the volts goes below 10v with the starter turning, it won't start.  and you need to charge it or replace the battery.

should be no voltage at the starter terminal till starter button is pressed.
did the neutral bulb ever work? do you have someone who can push start you?

I jumped the positive terminal to the starter terminal and nothing happened, could that mean a bad ground? Those values are right, I just went and rechecked them. The voltage went up when I hit the starter button.

The neutral bulb worked the other day when I first tried to crank it after I finished getting the motor together and back in the frame. I'm not sure if trying to shift out of neutral is what turned it off or it just turned off. Either way it won't shift out of neutral or I would have already tried to roll is down a hill and jump start it. I'll try to play around with the shifter mechanism and see if I can't get it to go into gear.

I just don't understand why it's doing this since it turned over fine last fall before I tore it down. There is always the possibility that I overlooked something, or didn't do something the right was (washers on the idler gears). Thanks for taking the time to try to help me. It's been over a year since I bought this motorcycle and I haven't even heard it run!