It started sputtering and dying now and again and now it's died all together.

Thought it was a no spark situation, checked the plug. Fouled completly black, but sparked every crank.
Installed a new one and only after a few cranks the plug was again completly fouled black.

Then I checked the oil level and noticed it was about half an inch above maximum.
Could it be that the carb is leaking fuel into my oil and thus preventing start up??

I think you are on the right track to you problem.

If you got that much gas in your oil it could be the float out of adjustment or a piece of dirt stuck in the needle valve causing it to flood with gas. Open the little *beep* valve on the bottom of the carb and see if any dirt comes out in the gas and start from there.....

Removed airbox, carb and valve cover.
Drained some oil-fuel mix so that it's nice and between the marks.
Doesn't smell like gas in the oil.

Checked the valve clearance and the decompression. OK
Intake between Carb and airbox felt oily, should be nice and dry I expect.

Tomorrow I'll give the carb a good cleaning and check if any dirt comes out anywhere.
It's a fairly fiddly job getting that carb out.

What's been bugging me is that the fuel tank was completly topped up???
And a brand new spark plug turned completly black after only several cranks.
A slight plume of white smoke from the exhaust.

Some idiot filled it up with diesel????

Cleaned the carb, drained the fuel tank.

As I've become quite the carburetor guy I thought I'd swap out a carb from a running 500 HO.

No joy.

Then I proceeded and swapped CDI unit and ignition coil.
Again No joy.

it's got air, fuel and spark, but simply won't start up even with parts from a normally running 500 HO.
A once in a while slight puff and it just cranks round all the time.

Now I'm starting to get a little worried

Before you throw parts at it check the basics. compression? try a spark tester it should jump 1/4 of a inch or so. does it try to start? shut your gas off and try it. give it a drink and try it. try it wide open does it lock up or kick back on you? if so could be sheared key on flywheel. also what happened before it quit. maybe take your cam chain cover off and make sure it is turning.have seen some bottom sprockets spilt in half.

With some renewed enthousiasm and after reading through the service manual again and checking off everything I did before.

I pulled off the recoil starter removed the nut holding the flywheel in place.
HEY PRESTO
Sheared flywheel key.

I asked around and someone hit a tree-stump at a fair speed and the engine abruptly stopped.

So I'm ordering in the flywheel puller and several new flywheel keys.
That should fix her up.

These vehicles are really built with a history behind them.

Thx guys and Polartech

Glad you found the problem Chris...

that will do it. glad you got to the bottom of it.