Engine swap..clutch issues, possibly?

[libindaniel2000]

Alright peeps, I am not having a good day...
I screwed up the engine on my 2001 gs 500 because I ran dry of oil (long story, yeh, I have never felt any stupider). It made a knocking noise when it was dry and then the piston seized etc.
I got a 2004 engine from ebay..swapped it out, rewired everything back.
I heard the same knocking noise!!! 
My friend suggested possible clutch problem.
I took it off center stand and tried to start it at neutral. I had to engage the clutch, it would not start otherwise. It made that knocking noise.
I put it in gear and tried to start it. The bike lurched forward (almost as if the clutch was not engaged).
I did notice that the old cover does not sit flush with the new engine.

What do I need to do to isolate the issue? Clutch cable, the actual clutch, what is going  on?

I would hate to see her go in a junkyard after so much work and money put into it... 

[adidasguy]

Due to clutch safety switch, you do need to pull in the clutch to start.
If in gear, the clutch plates can be sticky and will lurch when trying to start. Hence best to always start in neutral.

[libindaniel2000]

Any idea on possible reasons for the rattling noise? It almost sounded like something was hitting a metal plate..

[libindaniel2000]

Also, when in gear, if I engage the clutch, the bike does not roll.

[adidasguy]

The WIKI has a section on clutch adjustment. That's probably all you need to do. Sounds like it is too tight and is always engaged.

Do you have about 1/4" play at the clutch lever?

Oh, and you can do all this work ON the center stand. There is no switch, interlock or safety switch on the center stand (just the side stand, so have it UP)