Boys, boys, boys,
Yes, all of that makes sense.
But you are forgetting all the time and MONEY spent locating parts, finding a machinist, finding the associated Katana wheel, brake discs, master cylinder, brake calipers, brake lines, and all the myriad other expected and unexpected issues and parts he will then have to resolve.
Remember, this fellow started out telling us he wants to use this bike to save gas. He has it and wants to get it running.
At no point did I hear him tell us that he wants to invest a lot of money or turn it into a GS500-engined superbike. If that's what he wants, maybe he should just save his money and buy a used high-performance bike, but that's not what he told us.  
Yes, with a Kat front end and swingarm and various other parts it would be a much better GS500. But does it need all of that? No. It is fine for what he needs it most likely just as it is and he can do some minor mods and still have a cheap, reliable, fun and gas-saving bike.
It's all up to him of course, but I think you guys are going a bit overboard.
Best wishes,
Todd

Wow, two very distinct sides here. I go out to the garage to pull the motor and come back to 2 pages of replies, WOW.

The bike has been babied since new, within the 1st year the Chin Spoiler, Belly Fairing, Hindle Exhaust, Carb Re-Jet and K+N Filter were all added. Since then it has only racked up 6K+ miles. and has sat dormant for the last 2 years.

I've had Race Rep's and a few of my Old Riding Buddies have recently left the Dirt and gotten back into street bikes, one buying a 2004 R1, another with a stunted out GSXR600.

The pressure they leveled at me to get back onto the street has been tremendous yet I have been resisting the urge to buy something new, or slightly used. All that will lead to is Debt, Increased Insurance Points and Premiums and pains in my neck and back as the body has taken a pounding while off roading.

So combine the above with rising gas prices and I thought to myself, Hey I got a bike stuffed away, it's relatively quick around town is great on gas and only needs a fork seal and a color change for me to be seen on it. I know it will never keep up with most of the bikes out there(It wasn't suppose to when new) and I am not willing to spend much money making it faster, that's not where I am in my riding life right now but it can be a nice, creative bike. Seeing the current trends in custom building and some of the Mfct.'s using matte or flat colors I figured a blacked out tank and tail section would look good and not be much trouble to Rattle Can.

Yes, originally thats all I planned, re-spray and a leaky seal fix, then I found this site.

As mentioned in the original post I saw a project here that got my blood flowing, especially seeing the Duc seat fitted, the motor sparyaed in my color choice and the quality of work on that project. After seeing that my mind was made up that I was tearing the bike down to the frame and doing similar mods.

Buddha was nice enough to provide some info on the Fork Swap and a set up he sells but honestly right now it's only a marginal thought of mine.

My main priority right now is to fix the leaky seal (Everything is disassembled, cleaned, inspected and ready to go on that) make the sub frame mods to fit the Ducati Seat, Clean and spray the motor a semi flat black and detail it, strip the frame and swing arm and repaint them a dull aluminum as well as getting the rims stripped and painted something other than white. This is in addition to cleaning and refurbishing / repainting all the little incidentals and such, but basically at this point thats all I'm down for. That still is a tremendous amount of work but relatively cheap mostly my labor to clean, prep and paint everything. All I'm buying at this point is Ducati Seat, Fork Dust and Oil Seals, Fork Oil, K+N LunchBox, the required jets, Piant and Painting Prep materials. I have tons of metal lying around so what ever I need to fab up I should have the materials on hand for that.

In conclusion, thats it. I'm sure I'll have to buy more things  and do more fabbing than I have planned right now but I'm not going to try making a 2008 Haybusa out of a 1995 GS500E.

Thanks for all the advice, opinions and assurances, looks like I found a good site.

Yea that cosmetic charlie upgrade is the last thing I'd do ... and for your comparison I coated a GS frame on the inside - yes inside the frame section and powdercoated shiny black on the outside. Yea, I still sont do a drastic seat swap.
WHY cos most seats look too fat for the GS. The R6 and the myriad of other seats are wide, as is a duc (monster right ??)... but atleast its not as bad as the R6. They all look great form the side, from the front or back they just look like Queen Latifah's ass on Paris Hilton.
Start spraying sheite ... and you'd find out double quick how shitty the paint you buy these days is. Really, factory paint is without a doubt better, as is their prep and the fact that they are working with clean metal.
Cool.
Buddha.

Here is dgyver's thread.I was there yesterday and he's almost ready for paint. http://gstwins.com/gsboard/index.php?topic=34220.0