Hi Dirt and Street,
Well here's my two cents worth.
I have seen several comments in this thread that are quite correct. One from one who has the biggest unit of all, check the inner drum of the clutch and make sure that it is not grooved too badly. You can smooth out SMALL indentations with a small mill file. If it is grooved too deeply then replacemnet is the only answer.
Another from Dale Lineaweaver, make sure you are running a good quality motor oil. I would suggest Motul 5100 15w-50, or perhaps motorex 5w-50, the lower the winters number the more it will help your cause. But, the motorex is quite a bit more expensive than the motul. It's always going to drag a bit until the motor oil comes up to temp.
Now for the meat (get it Taffy?) of the matter.
I had a 94 & 1/2 FE501 that I used for desert racing and trail riding. The clutch worked fine while riding, but, it would drag with the trans in gear and the motor running. I used to (as another post suggested) find neutral as I rolled to a stop. But, the worst for me was that I couldn't start the bike in gear, which is way no good for dead engine starts like we use in the desert. So here was my solution, which I got from Eric's in Pasadena.
Seems that (according to another post which is true) the earlier pressure plates, yours included, would flex as the push rod would try to lift the pressure plate, thus, not allowing full dis-engagement. So, I put a 1997 pressure plate, and 350cc springs in it, along with a domino control. I was concerned that the 350 springs would allow the clutch to slip, but it did not ever in many hundreds of miles of racing and riding. Some of it with great abuse to the clutch. And, I could now start the bike in gear, and find neutral while sitting still. The domino control came standard on the 97's and I think gave more lift, but, keep mind that you're limited on the amount of throw of the lift mechanism.
A cheaper fix is to make sure that 1) none of your steel plates are warped. If they are you'll never get it to stop dragging. 2) that your lift mechanism is properly adjusted. This is crucial to proper dis-engagement, as well as, when the clutch wears there is proper clearance between the push rod and the pressure plate and lift mechanism. Here's how to set it.
First remove your clutch cable from the throw arm, and remove the clutch cover. At this point you might want to use a cable luber and lubricate the clutch cable. I like Tri-flow myself.
Replace your clutch springs with ones out of a 350, this will help the pressure plate to not flex as much when lifted. (When you are doing this, if you remove the pressure plate and pull out the push rod, you can then pull the throw arm out of the motor to get a better understanding of how all these parts work together, then put the pressure plate back on with the 350 springs. Be careful not to over tighten the spring bolts as they strip easily)
Your pressure plate has an adjustment screw in the center of the pressure plate ( the 97 pressure plate uses different thickness shims to adjust the free play) that has screw and a lock nut.
The push rod for the clutch rides in a bearing on the pressure plate (which is attached to the adjustment screw), and in a notch on the throw arm. This notch is a flat ground into the throw arm shaft, and the clearance between the push rod and this flat spot is critical to get maximum lift.
Check to see how much play there is in the throw arm, it shouldn't move very much before it starts to engage the push rod and try's to lift the pressure plate. The push rod should not have any pressure on the lift mechanism or throw out bearing, it should float just above them. (Remember, as the clutch wears this dimension will decrease.) Loosen the lock nut and adjust the lash as neccessary. You'll have to play around with it a bit to find a happy medium, to get the most lift, with out having any pressure on the push rod.
Once you have finished adjusting, put the cable back on, leave at least 5mm of play at the end of the lever and check for proper function of the cable and lift mechanism. With the cable lubed, and the push rod adjusted properly, you will notice a big difference it feel. When you are satisfied, put the clutch cover back on, fill with oil and give it a try. I think you'll be happy with the improvement!!!