Holy crap, this is a crazy one.
Do the 2-wire mod.
After the 2-wire mod, pull the green wire out of the connector near the clutch lever (it transitions to black-red here) and cap it. There's another 3-wire connector where that wire could be easily disconnected (it transitions from black/red back to green)... maybe under the neck cover? under the tank? Anyone know?
The lockout and interlock circuits both use the neutral and lockout switch in their logic, and the overlap is allowing the lockout switch at the clutch lever to backfeed the neutral light through the IC box's ground! Pretty sure the current is going from brown, through the neutral LED, into the lockout switch on green, out of the lockout switch on yellow/green (only when clutch lever is released), into the fusebox on pin 12, back out the fusebox on pin 11, and attaches to the mystery red/white wire on pin 2 of the IC box, which PROBABLY connects to ground after passing through some resistors and transistors before dumping to ground on pin 6.
The lockout circuit is designed to allow the IC box to find ground if the clutch lever is pulled (dumps straight to ground, no feedback into neutral light territory) OR if the clutch lever is released BUT THE TRANSMISSION IS IN NEUTRAL. When the clutch lever is released, the clutch circuit and the neutral switch circuit are connected, and the lockout circuit (current from IC box pin ) finds its ground via the neutral switch. This fallback from the clutch lever to the neutral switch is where the two circuits have some bleedover, even though the bleed is coming from the LED, not the IC box.
Just pulling the green wire out of the connector at the clutch lever on a stock bike would stop the feedback, but would mean you would always have to be in neutral when starting the bike because you will be telling the lockout circuit that the clutch is always engaged. Performing the 2-wire mod disables the whole check, so the starter no longer cares if the clutch lever or neutral switch are open or closed.