Doing a replacement of clutch plates and basket on my 3 month old XT250 2023 with 3,000 miles on it.

After replacing the worn plates and clutch basket, the clutch is soft and won't disengage.

I can feel the (soft) clutch action pushing out on the rod in the center, if I hold a screw driver in. However, it does not push far enough to disengage the clutch. It's seems like I need to adjust the clutch, but I would assume by default it should disengage at least a bit and not be completely out of range.

It's as if the inner rod is too short to extend this action out and push against the springs. The assembly diagram indicates that all parts are in place as they should be.

I am really confused about what is wrong here.

Jack up the rear wheel and run the engine a bit? Or just ride it around.
Likely just needs to splash oil around on the clutch for it to behave properly.

Yep, tried that. Same result.

Weird!?
Did you oil the surfaces before installation?
Is there some kind of spacer washer needed on the push rod?

I know on the XT225, the clutch never fully disengaged. You always felt a slight drag and distinct bump when shifting from neutral to 1st. It's a wet disc clutch design unlike the old school dry clutches in cars which would fully disengage. Not sure how much drag is acceptable, however. If you are sure that assembly was correct and clutch cable is adjusted properly then not much else to do. The new discs may need time to wear in. I don't recall this when I replaced the clutch discs on both our 2003 XT225 bikes. Lubricity and viscosity of oil can influence drag. This was my experience for whatever its worth. Good luck with sorting this out.

Thank you Muniac.

U R Welcome. I hope you get this sorted out. Such problems are frustrating and degrade the enjoyment of riding your bike. Perhaps someone here that owns the same bike will weigh in on what's normal for the clutch. This seems a bit odd for such a new bike with low mileage.

That is unusual for a clutch with that few miles to need replaced. Was the clutch adjusted too tight to cause it to slip? Was it abused to the point of overheating?
If either is the case, then maybe the steel plates have warped, which would cause the problems you are having with it not disengaging. I am assuming you didn't replace the steel plates, but did you lay the plates on a sheet of glass to check for flatness? Did you measure the thickness of all of the parts compared to the old ones? The new fiber plates will be a little thicker, maybe a couple of thousands of an inch, but if there is a big difference then maybe they sold you the wrong parts.
Just throwing stuff out there to try and help you nail down the problem. As I said, clutch slippage at that low of miles is very unusual. I've got 32k miles on mine and no clutch slippage.

Thank you skypupbob. I have been doing some hard enduro riding. New to dirt bike riding and certainly abused the clutch All parts are original from Yamaha and I did replace the whole set including the steel plates. I also replaced the basket since I broke the fingers that hold the plates in place! You may be right about the plate thickness. It does give me an idea to remove a plate or two and see if it brings back the clutch action, just to test it out. Since it is a new bike I assumed it should work without needing to adjust the clutch, considering there was only a couple of mm of adjusting left on the rod, but perhaps it needs adjusting.

There's usually a stack height measurement range with all new friction plates and steels.

I agree with Muniac in that there's a very small adjustment range. A little too tight and it'll slip, a little too loose and it'll drag so much its hard to shift.