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Adding another tooth or two to the front sprocket (or using a smaller rear) will lower the rpm at highway speeds and make for a happier, longer living engine. With the greatly reduced weight of the kid's bike it doesn't need the short gearing of the stocker. If he does some performance mods, he'll definitely want taller gearing.

Cases have to be split for cams, so he might be better off with some mild head work, a careful valve job (that is, not like those done by your local auto machine shop!), and maybe a slightly larger carb. A thinner head gasket will bump up the compression a bit, but be sure to check the piston/head clearance. They make "R" followers for the 650s, if he can find something like that for the 500 he probably won't need to bother with new cams.

Try to convince him that mild is better than wild.
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