Have a 79 IT400 that i split the cases, had the crank rebuilt and new main bearings. Putting the cases back together I've come across something I'm not sure of. Spinning the shaft the clutch basket sits on, there is noticable drag. The counter shaft spins. Is drag OK or should it be pretty free spinning?

Is it in gear?

I need to mount the shifter rod and shifter to see if I can get it into neutral I guess. I'll drag my son out to the garage to help try to shift to the gears and find neutral.

Thanks.

It's really hard to say how much drag is too much...  it does take a little effort to spin the input shaft especially in gear but it shouldn't be very difficult. 

It's not going to just spin super freely with no drag at all either.  

I can't get the shifter drum to turn. Guess I'll be pulling the cases apart.

If you have the detent plunger & spring in place you'd be strugling to turn it by hand against the spring & plunger.
Could back them off or out & try to see if it's free.
Mind you if it then turns you'll need to twiddle one shaft to get the dogs to engage & clear as you go through each gear.
Then if you want to Check Each Gear just screw up the detent but will still need to twiddle a shaft as you force the drum around by some means other than the change mechanism, helping hand from grips maybe plus screw in the middle.
Quite hard to get over each high point on the cam, & neutral is a half movement which then means you'll be able to turn each shaft individualy.
Hope i'm thinking of the correct motor but all the 250's & up are the same so far as detent operation goes from the very first model.

I haven't put in the detent plunger/plug yet. I can't get the shifter drum to turn at all. I'll split the cases again this weekend and post what I find.