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I believe its on the tranny. I have the same problem but I think mine is the light or connection its self. If it rains or I wash the bike it works for a day or two then stops working.
it works from a signal from ecm,its a speed vs rpm thing,a second late is normal but not at all could be clutch slipping,or if your running a pcv there is a box that needs to be checked or unchecked ?
you might also want to look at the wireing harrness, my right frount turn signal and the right indicator on the dash stopped working last week, when I found the problem it was corrosion on the wireing harrness plug from the main harrness to the turn signal indicator on the dash, it also has the neutral light on the same plug and the oil light. Just a thought..
Agree with the last. It's likely the neutral switch (sensor) mounted on the top of the trans cover ( right in front of the starter) they get gummed up with trans juice or just plain fail. Try removing and cleaning or just replace, they're cheap. There is NO connection with the ECM etc. It's simply a switch that goes to ground when in neutral. If you look at the wiring diagram in the FSM it's basic. Tan wire goes straight from the switch to the light.
On my bike the neutral goes through a relay. I cleaned all the connections and it's been solid ever since. But then again my bike is 26 years old.
The only issue having to do with the clutch would be adjustment. If the clutch doesn't fully disengage by squeezing the clutch lever, the tranny will be difficult to get into neutral. Some find they can go from second to neutral easier than being in first and trying to find the right effort needed to hit neutral.
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