gen 1's can have problems with the selector forks due to cack handed 2-3 gearshifts on the back wheel.
also a possibility of a broken return spring in the selector area.
if the bike is in gear, you will have some backlash as the teeth mesh, check for up/down/left/right play in the shaft rather than rotational play.
did the noise go away with the clutch pulled in, or only on gear selection, that should tell you where the problem is!
but to save you the hassle i'll give you £100 for ii as a non runner