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Balance the bluebook value/sales value and look at your options. (Bluebook and actual value are NOT the same.) Don't take advice from people trying to sell you something, look at what you have, go from there. KBB is $2450, if you got it for $500, fix it and run it. If you paid value for it, cut your losses, either run it until is dies or part it out/sell it. For reference, I just paid $1500 for a beautiful 05 800 RMK with damaged piston and crank. (And I paid more than I normally do, but the chassis was in great shape, with 2500 miles.)
Ok, first off I doubt it has that much runout... they usually snap in half before they get to 7 thousandths
I personally would go the inexpensive route on that old of a sled. Yeah, IndyDan's stuff is warranteed, but its an '02, not sure I'd spend that kind of money on an '02.
There is a guy in Mapleton, Utah that runs a shop, Jesse is his name. Phone number is 801-319-3326. He offers reman'ed motors for a decent price. I have used 2 of his motors in older (2005 and older) 800 RMKs and they have held up well. I think he offers a small warranty on them, 500 miles or something, but he's pretty inexpensive. I do all my own work and I could buy the reman'ed motor from him for less than I could do one myself.
I suppose it all depends on how much you are going to ride it.
sled_guy