I was asking around through the local sub-forum of the ADVRiders website and a fellow came highly recommended by a number of those guys as a local not-well-known but highly-regarded bmw expert. His shop wasn't too far from my office so I ran down there on my lunch hour today.
Pulled up to his shop, recognizing it by the 12-15 or so BMWs sitting outside, including an old r75 and a Bumble-Bee r80(?). I immediately remembered the place as my FIL sent me there a couple years ago to pick up some parts for him.
He was nice enough to stop working on an old 'Guzzi up on the lift, sit and chat with me. Turns out he knew my FIL very well and actually has worked on my r65 a few times: Rebuilt the front forks, installed a timing chain, etc. Apparently he also installed a high-end charging system in it, but my FIL didn't think it was working correctly and had him remove it, which ended up causing a bit of a falling out between the two. Too bad, that would have been nice to have! He also remembers telling my FIL that the knobby tires wouldn't fit well on the r65 and advised against adding the PVC pipe spacers in the forks... if any of you read my fork thread you'll remember I mentioned taking those out when I redid the seals, etc. He was surprised and saddened to learn of my FIL's passing.
Anyway, he did say it sounded like a spline issue but said it could also have been the clutch going out. He quoted me about $750 including the $250 spline driveshaft and said if I brought the gearbox in, I could sit and watch him rip it apart and see what it needed... make a list and go from there. He told me all about how to bump the swingarm back, block the crank, etc... so he really sounded like he knew what he was donig.
No doubt I"ll need a new clutch plate. So yeah... looking at about $1100.

I am happy to find a guy that is familiar with bike and willing to work on it for me. But it looks like the r65 will be down for a long while.