Can i grind out the wear on a inner clutch hub

Yes the plates do change dimension as it warms up, which will change the feel and lever adjustment. I would inspect the outer basket and inner drive hub for wear. Over time the steel plates will wear notches in the inner hub, and the friction plates will notch the basket as well, and when this occurs the clutch plates can't move freely and can't engage properly. Good luck!

The shifting problem is a bent shift fork. The clutch problem is chatter on the outer, and/or inner, clutch hub and fiber friction plates. The friction plates are catching in grooves worn into the clutch hub by the friction plate tabs. The hub should be smooth. I created a diagram of the shift system and of the clutch to give you an idea of how they work. Please rate my answer. Thanks.

Remove the right side cover and check the operation of the side case clutch lever by looking at it from the inside. If it is operating freely and the cam on the arm that pushes the clutch release pin is not worn out, the problem would be the fiber friction clutch plates. Did someone use synthetic oil in the gear box? Oil with "Special" lubricants? These can shrink the cork on the plates and cause the clutch to slip. Some synthetics can swell the cork and cause the clutch to grab and not disengage. If swelling or shrinkage of the plates has happened then the repair is to install new plates. Potentially, grooves may be worn in the inner and/or outer clutch hubs. This would prevent proper operation of the clutch. The repair there is new clutch inner hub (if worn), or clutch outer hub as needed. A worn needle bearing could also be the cause if the clutch will not disengage. Please post a reply if any more info is needed. An exploded view of your clutch can be seen at the website below. Please take a moment and rate my answer.
www.babbittsonline.com

http://www.bikebandit.com/2002-ktm-motorcycle-125-sx/o/m4758#sch465207

Please see this schematic to understand your clutch.
There are springs which press two SETS of many plates together. One set is metal disk construction and splines into the inner hub of the clutch basket assembly. The other set is made up of metal, with (often) compressed cork material - these spline into the outer hub. When the lever is pulled in, the spring pressure is relieved off the plates, and the inner and outer hub are independent of each other. When released, the springs push the plates together, locking the inner hub(engine power) to outer hub(transmission) Now that you understand how it works, I'd say the solution is clear, open up the clutch and take a look at your plates.

Clutch friction plates are often the worn out component of that assembly. IF the plates don't spline in correctly with the basket due to some physical damage, then you should replace the basket. The clutch is comprised of an inner and outer hub that become interlocked through metal disks and friction disks pressed together under spring pressure.

http://www.bikebandit.com/houseofmotorcycles/2002-honda-motorcycle-cr125r/o/m2178#sch304800

Follow this link to a schematic of your 2002 honda cr125 to see how it all fits together.

your clutch is simply a stack of friction disks and metal plates. The friction disks are splined into the outer hub ring and alternate, one friction disk / one plate / one friction disk / one plate etc. It's very simple to free this up if it's locked up. remove clutch cover. If you are unsure which is your clutch cover, follow the clutch lever cable to the actuator arm. remove the cable from arm and all bolts holding the cover. as you pull out the cover, you will see the arm rotate that's because it's geared into an arm that is connected to the front plate of the clutch basket assembly. You'll see it as soon as you pull it off. now you'll be looking at a round plate with 6 bolts with springs underneath. when you arent pulling the lever, these springs are extended and push the friction disks and metal plates together, thereby locking the inner hub to the outer hub. The inner hub is connected to the crank, and the outer hub is connected to the transmission input gear. So, if pressed together by the springs, your engine running causes your bike to move. Pulling the clutch lever in pulls the spring tension off the plates and allows them to separate. This allows your engine to be disconnected from the transmission. If your plates are locked together you will remove them one by one if you can and lubricate between each plate and disk and reinstalling. Pay close attention to how it came apart. Reinstall bolts and springs reinstall cover, aligning the lever gear teeth with the front of the clutches teeth correctly. put it all together and see if you are okay now.

Your bike has a faring on the left side so you may need to remove it to gain access to the left outer casing for removal. You will not be replacing any gears. The only thing needed are new friction plates ( fiber plates w/ cork surface ). The outer pressure plate comes off with 6 bolts. Then the friction and metal pressure plates slide out from the center clutch hub. Install a friction plate then a pressure plate, friction, pressure, friction etc.. Please rate my answer. Thanks.

new procut basket and barnett plates. Had to file the barnett friction plate tangs they all slide but are a tight fit. All plates installed carefully per the Barnett instructions. Started the bike in neutral all fine shifted into 1st clutch in, I feel the bike want to creep forward although just slightly (I can hold it with my feet down). Can't get to neutral again with the clutch in until I shut the bike off. So, just before I go back in and pull a plate out to make the clutch pack smaller, i wondered whether anyone here has had this problem and whether if I ride it like this for a short while whether the clutch pack will settle in and fully disengage?,A too-high overall thickness of the plate stack will cause drag between plates when the clutch is disengaged making it difficult to select neutral when the bike is stopped. The last 2mm steel plate can be interchanged with a 1.5mm curved plate facing away from you if you want to adjust the stack to get the 38mm stack thickness, or if you want a more progressive, soft clutch engagement. A commonly-used substitution that adds an additional spring plate to the stack. Any of the steel 2mm plain plates can be exchanged with 1.5mm plain plates to reduce stack thickness or increase stack thickness as needed to achieve your desired overall height. You will see the need for this as friction plates wear, so keep your steel plates from pervious clutch replacements as spares to be used as height adjustments later. The 2mm and 1.5mm steel plates only need replacing if they’re scored or warped.,,,

new procut basket and barnett plates. Had to file the barnett friction plate tangs they all slide but are a tight fit. All plates installed carefully per the Barnett instructions. Started the bike in neutral all fine shifted into 1st clutch in, I feel the bike want to creep forward although just slightly (I can hold it with my feet down). Can't get to neutral again with the clutch in until I shut the bike off. So, just before I go back in and pull a plate out to make the clutch pack smaller, i wondered whether anyone here has had this problem and whether if I ride it like this for a short while whether the clutch pack will settle in and fully disengage?,A too-high overall thickness of the plate stack will cause drag between plates when the clutch is disengaged making it difficult to select neutral when the bike is stopped. The last 2mm steel plate can be interchanged with a 1.5mm curved plate facing away from you if you want to adjust the stack to get the 38mm stack thickness, or if you want a more progressive, soft clutch engagement. A commonly-used substitution that adds an additional spring plate to the stack. Any of the steel 2mm plain plates can be exchanged with 1.5mm plain plates to reduce stack thickness or increase stack thickness as needed to achieve your desired overall height. You will see the need for this as friction plates wear, so keep your steel plates from pervious clutch replacements as spares to be used as height adjustments later. The 2mm and 1.5mm steel plates only need replacing if they’re scored or warped.,,,

new procut basket and barnett plates. Had to file the barnett friction plate tangs they all slide but are a tight fit. All plates installed carefully per the Barnett instructions. Started the bike in neutral all fine shifted into 1st clutch in, I feel the bike want to creep forward although just slightly (I can hold it with my feet down). Can't get to neutral again with the clutch in until I shut the bike off. So, just before I go back in and pull a plate out to make the clutch pack smaller, i wondered whether anyone here has had this problem and whether if I ride it like this for a short while whether the clutch pack will settle in and fully disengage?,A too-high overall thickness of the plate stack will cause drag between plates when the clutch is disengaged making it difficult to select neutral when the bike is stopped. The last 2mm steel plate can be interchanged with a 1.5mm curved plate facing away from you if you want to adjust the stack to get the 38mm stack thickness, or if you want a more progressive, soft clutch engagement. A commonly-used substitution that adds an additional spring plate to the stack. Any of the steel 2mm plain plates can be exchanged with 1.5mm plain plates to reduce stack thickness or increase stack thickness as needed to achieve your desired overall height. You will see the need for this as friction plates wear, so keep your steel plates from pervious clutch replacements as spares to be used as height adjustments later. The 2mm and 1.5mm steel plates only need replacing if they’re scored or warped.,,,