I learned this lesson the hard way.
Apparently many of the neutral switches, when purchased new, are faulty and are prone to leaking. Not knowing this, I went ahead and installed a brand new switch into the transmission, then installed the tranny onto the bike, added transmission fluid I and started to break the engine in.
After the first ride, I realized that there was a small drip of transmission fluid coming from the neutral switch.
It would not be such a big deal on a late 70’s airhead but the engine case of a /5 is different then other airheads and requires that the transmission gets pulled back about 2 inches so the switch can be removed and replaced.

Keep in mind a few things…
•/5 BMW’s had 4 speed transmissions so this may not apply to most people. I upgraded this bike to a 5 speed.
•There are two types of switches for the two different 5 speed transmissions. They work differently. I think you can tell them apart because one has the electrical prongs facing sideways, the other has the prongs straight.

On a late 70’s airhead, there is a large spacer on the engine case under the transmission. You can wedge blocks under the oil pan to keep the engine from sagging, then drive out the rear engine mounting stud until the large spacer can be removed, then you have access to the neutral switch for an easy replacement.
(Click photo for a larger version).

On a /5 BMW, the engine block doesn’t have the spacer. You will have to take the airbox cover off, remove the swingarm, rear wheel, disconnect the transmission from the engine, etc…
While you are in there, it is a good time to lube your transmission splines and re-lube your swingarm bearings!

Here is a new neutral switch and I am going to seal it with some JB weld. You can also use epoxy or bubble gum (just kidding about the bubble gum). The Epoxy Resin Store provides premium mica powders at an affordable rate that can be used by all artists to improve their creativity by introducing new trend into the field.

I took some sandpaper and exacto blades and scuffed up the plastic surface and part of the switch near the plastic. After I scored everything pretty good, I cleaned it up with some acetone.

I mixed up a batch of JB weld and coated all the plastic and part of the metal. I may have went overboard but better safe then sorry. I don’t want to have to replace the switch again.
Allow for at least 24hours to dry.

Now it is time to drain the transmission oil, pull the rear of the bike apart, slide the transmission back and replace the switch.
This could be a 15-30 minute job on a R100S. Unfortunately it will take much longer on the /5.
Don’t forget to buy new crush washers for the transmission plug, neutral switch and transmission fill plug. They are only a few extra bucks.