Guys,
After removing the motor three times (I am good at this now) and testing at IMI on Sat everything is fine–it was the gears.
The proper procedure to use is in the Rotax 125 repair manual that you can download off the MAX site.
You will need snap-ring pliers, two new snap rings and a gear set, gasket. Just note the gears as you take them off-the two large ones are flip flopped.
Most important: Alignment on the left side gears is a 2-mark alignment straight up (12:00) and alignment on the right side gears is a 3-mark alignment (~11:55 position).
The replacement above seemed to change my gear selection by 1 tooth on the rear.
Cost was about $60-$70
A lesson learned!