Engine case wear-'77 KZ400

Good evening all.  Anyone have an idea why the starter sprocket is wearing up against the case like this?  Thanks!
-Tom   

I will wait for the 400 guys to confirm but it appears the gear is fitted the wrong way round, also have you removed the crank oil seal or is it missing ?

No, that's definitely the engine side; impossible to have it reversed.  Yes I am replacing the seal. and the starter clutch seal as well. All proper parts are there albeit worn but not enough to warrant that wear I think.

Do you have a picture of the other side of the gear that engages in the starter clutch

It looks like the missing oil seal at the below location controls the rest position of the gear (don't forget if the starter clutch is working correctly this gear only turns during cranking, once the motor is running this gear should be static)
Edit: you might also want to check for excess "end float" on the crank - also the marks on the crank and gear bushing suggest a lubrication issue ?

Well I think figured it out. After staying up al night and comparing mine with used parts on eBay, looking for wear mark and patterns I've come to the conclusion that the 
"finger" that mounts on top of the chain slipper which is screwed into the engine cover and applies some pressure on the sprocket, was installed upside down by the previous owner.   Allowing the sprocket to bounce back and forth off the case. See attached pictures  Mine is on the pink towel.  No wear/rub marks present on the outer rim on mine.  This is the only thing I can figure.  Everything else parts-wise is present.