I confirm that the shaft should just pull through the cases once the ratchet arm on the rigt hand side has been lifted clear of the shift drum. As it only binds when the splines are about to enter the case, I wonder if the bike had been dropped at some time and has bent the splined section out of line. That should be easy enough to check with a straight edge (e.g. a steel rule). I had a similar problem with a Suzuki T125 engine, and I managed to straighten the shaft enough by pulling the shaft through until the bent section started to bind, then pitting a length of tubing over the bent end and "persuading" it straight. The shaft should bend easily enough, but make sure the bend is just entering the crankcase, otherwise you'll and up with an S-shapde shaft that definitely won't come out.
Alternatively, if the shaft really is scrap, just get out the cutting wheel and chop the end off!
Graham
