The neutral indicator switch on my '78 XT500 didn't work (light stayed on constantly), so I bought a new switch. Now I've got the opposite problem -- the light never comes on. I tested the new switch -- it works fine.
I'm left with the conclusion that the switch's spring-loaded electrical contact isn't touching whatever transmission part (shift fork?) that moves into position when the bike's in neutral and grounds the switch to make the light come on.
Any ideas? I've tried backing the switch out of its threads -- and screwing the switch farther into the transmission (by removing the copper washer) -- but neither makes any difference.