Clutch or ? Need input

[Breezy]

First no surprise now that a new problem has arisen, this bike was to be a winter project anyway and being original in most every way I expect things to happen.
Well today after work I took the 1982 VF45 around the block to warm it up to help keep all the new fluids moving in there internal areas so it does not sit like it has in the pass from the PO.
All was going fine until I went to shift into third gear and it kind of grinded at the peddle and refused to go into gear, so I slowed down right away and with the clutch handle lever in came to a stop then took a few seconds to assess the situation and tried to moved the clutch pedal down to neutral with care. It felt a bit hard to do and with a bit of noise not so much gridding but a clonk it went into second and then neutral. So only a few blocks from home I put it into what felt like first gear with a bit of work and made it home slowly. In the driveway I attempted to get it into neutral and again it was a but hard and gridded and popped into neutral. 
Put it up onto the center stand and took my stethoscope and listened in on the shifter shaft, slave cylinder cover area, and clutch cover while hand shifting and that was not easy. 90% of the loudest sound I heard was coming from the clutch cover. I can not shift but only one or two gears at a time then if I rotate the rear wheel I can proceed into the next gear and the same shifting down using the rear wheel to click the gear into position.
I did remove the slave cylinder a few weeks ago to clean and inspect it and it was actually not bad, I did flush the hydraulic system of the clutch with some new Dot 3 brake fluid. No signs of seeping around the slave cover or at the reservoir and it is full and clean also. 
Not having worked on a bike in years I have to ask would this possibly be a failed clutch?
As said the only way I can get it into any gear with ease is to rotate the rear wheel  a hair and it drops into gear.
Any suggestions what to check next?
Thanks in advance 

   

[hootmon]

I have a gen 3 bikes, so I'm little out of my knowledge base here..
On the Gen 3 (cable clutch). the Brakes use Dot 4 (Not DOT 3) fluid.
You can use Dot 4 in a Dot3 system but not DOT 3 in a DOT 4 system.. So I'd check that..
I don't know if you can view the actual movement of the clutch on the engine side, but I'd check (IF you can) that it is moving the correct amount..
Usually clutches wear and slip, not stop disengaging. So I'd look toward the hydraulic  side..

[Breezy]

The 1 gen VF45 used Dot 3 as stated in the service book that came with the bike or owners manual, even says on the clutch reservoir cover.
Will have to drain the engine oil and pull the side cover in order to check it's movement. I will start again with the slave cylinder and see if the seal has not failed or the "o" ring has failed. The clutch handle when depressed feels quite good without any sponginess or softness nor any sounds from the slave cylinder when operated. the engine is on its second oil change that was done last week and oil level is just under the top line on the site gauge and using Valvoline motorcycle oil.
Yes the 1st gen bikes are a lot different from the 3rd gen but are much more simpler, that was one reason I bought this old gal, not to just get back into riding but to get back to understanding the basics of a bike also, I guess this is my cahnce.
Thanks