2006 Classic clutch works until it is warm

Something is wrong with what I see in the picture the arm is to far up i believe that the pin on the inside is damaged.
I will try to post a couple of pictures of my working good set up.
 

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Thought I would post a pic of the clutch lever pulled all the way in
That lifter valve assembly must be messed up
On a scale of "no problem" to "holy s#!t" how bad are we talking? And I am inclined to agree with this assessment since when I was taking this picture and messing with the adjustment the arm would not return to its lowest position on its own.
 
I understand the pressure plate and free moving discs, what I am not getting is how the flywheel still engaging when the handle is pulled will be alleviated by more free play in the lever. That seems counterintuitive.
You're right, more free travel would make the pressure plate compression less, believe TURBO200R4 is correct. R-III-R TURBO had a good article on upgraded lifter and bearing, but if you have old style lifter and bearing you have to replace to later flywheel. I did that on mine, I have an 05, don't know when they made the change.
 
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There is a list of parts you'll probably need, somewhere on this site. When upgrading from the old to the new, different parts are needed. Lifter shaft, bearings, etc. etc. Yes, the new stuff is better, that's why they changed it. I did the swap on one of my 05's and with a Barnett clutch set. It came out wonderful! Been a while ago, and old age setting in, so I do not have the parts list......
 
Somewhere just above a piece of cake.
There is several threads on this topic
@warp9.9 has supplied a lot of good information and pictures there are several valves that are updated
As Warp looks his first thought was for a 06 who and whats been done to the clutch. Or is the one of the first clutches fit on a 04 installed on a 06 to keep production line rolling.
Not know the answer I copied a couple pictures from this thread.
Firts the bike in question. I have never seen a lifter shaft with no center hole and no visible splines and center hole for manufacturing showing. Like in the third picture





This makes me wonder who has been in this motor trying work on the clutch.
Another thought that popped in my mind is if they were in it did they stack the clutch right or is on of the smaller Inside diameter fibers interfering with the anti shudder spring and seat. Then well it also sounds like some of the steels are warped and kind of grabbing as she warms up. With the clutch kind of grabbing and rotating the input shaft a we bit could make it hard to select gears and shift.

I'd spend the few hours and open her up for inspection.
In my opinion this should be done verses all the trial and error testing that could be hurting something in the gear box.
Sorry it took so long for me to notice this thread.