Well if anyone is still interested the mechanic finally found the issue. Apparently the starter clutch went kaput and started working its way loose causing the clankity clank sound and poor running conditions. Still not really sure where the smoke is coming from (possibly something electrical) but it really doesn't matter because the starter clutch and rotor are more than I want to spend on putting this bike back together anyway. So if anyone is looking for spare parts to an 05 GS500 I got some for sale.

You're parting out a complete bike because of a starter clutch and rotor? They don't cost that much to replace......

Starter clutch is cheap and really can't go bad. It can come un-bolted, but in such hard steel,you just bolt it back to the rotor.

Rotor is fine if the magnets have not come off.

I don't get it - it is an easy fix. If you want parts, people here have plenty of parts. Where is the expense in fixing it? Putting a new starter clutch and magneto on the bike is a 15 minute job. Get the parts here for cheap - plenty of us have spare motor parts.

Look through the posts for starter clutch coming loose. Easy fix: bolt it back on to the rotor. Put the rotor and starter back on the bike.

What is your mechanic really telling you?

hrrrrm.... persykic message thru the veil of night to my head .... ole injun warrior "Two Dogs........." .. mechanic say ... this fella him bike broken long time all kaput ... lookum to my brother cycle shop down along freeway not too far ... buyum 600cc + nitro-crotch rocket .. sellum 'broken' bike for coupla beans online .. zoom-um zoom-um ...

least thats how it arrived in my head