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Kite, I just went through this. The bike starts great cold but when hot, WOW that sound about kills ya!!!! It's the starter drive, the piece that pops out of your starter. The 2007 / 2008 had issues with this kind of thing.
The big thing is if your motor has had any work done to it. Have you or other owners bumped it to the 103 / 106, or even more? After fixing the starter drive you might also want to look into a decompression release. The current 103 have a decompression built into em so they don't burn up the starter drives.
The first hint that the compensator is weak is the hard bang or crack when hitting the starter. That is the compensator going full travel and slamming into the stops. That happening over and over will destroy the starter drive, actually the sprag clutch in the starter drive. The sprag clutch slipping is most likely the grinding sound you are hearing. I have had an Allballs starter drive for over 4 years and 47,000 miles (installed at the same time as the SE compensator) and have had flawless operation since the change. 2008 Road King, stock 96 now with over 62,000 miles.
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