The clutch will engage while the bike is on the stand, but when off of the stand I get nothing. As I am new to these bikes, any input from you guys would be greatly appreciated. I did pull the clutch cover and could not see any adjustment mechanism. I looked up a parts list and am wondering if I need a special puller to remove the clutch hub. Also, is all of the adjustment done with spacers? How often do you adjust? Is it better to just replace the clutch blocks?

yes you need a special puller. you can make one if you or use a steering wheel puller. the adjustment is by stacking the washers in the clutch differently. I would be money your problem lies in the woodruff key for the clutch basket. it is one of the most common problems of the ktm sr other than breaking swingarm bolts, frames, and rear hubs. If your woodruff key is not broken check the actual clutch hub. Most guys ditch the stock one for a welded clutch drum because those break pretty often. i have seen guys break 4 in one weekend.
check out www.ktmtalk.com in the mini's section and search clutch. there are tons of setup tips there.

Jasle, thanks for the response. I have ordered a puller. If it is the clutch hub can I have the stock one welded, or does it need to be replaced?

you can have the stock one welded...depending on the welder it may or may not accept the stock denter bearing. if it does not just buy a cobra bushing and it fits in but you have to turn it down a bit. pvk racing sells new ones already welded at a decent price. tell him I sent you and you should save a few bucks.