I just picked up an 06 Arctic Cat 500 TBX with some transmission issues. What is happening is when in neutral, the rear drive shaft turns smoothly all the way up to the front drive shaft. When i put the bike in gear, I spin the secondary clutch shaft, and can feel it start to snag, and will occasionally lock. Sometimes it spins nicely, and other times the clutch shaft doesn't grab at all, and spins freely, not engaging the rear drive shaft. From what i've been told by the previous owners, is I will need to seperate the engine from the transmission. Is this true?

 

It seems that several of the Arctic Cat ATV's have Bevel Gear issues. The bevel gears are the gears that transfer the engines power from the transmission to the prop shaft that runs through the transmission. Apparently they can strip or lose teeth which im afraid may be causing your issue. If this is the issue you will have to pull the engine out and completely dissasemble it, replace the gears ( i think there are upgraded gears?) and put it back together.