How do you tell clutch is bad, on 2000 750 susuki katana

strip the motor down, more likely a bad selector or bearing gone.

Find a long straight road that climbs fairly steeply get into top gear at about 40 MPH then try to slowly accelerate. If the clutch is slipping you will find that the revs increase but the speed does not. It is not a good idea to rev to the max in each gear it can damage the engine and gearbox. Have you checked the clutch cable and the adjusters also is the clutch release mechanism (push rod I think in your bike) working correctly. A poorly adjusted or damaged, un-lubed cable, with no free play at the lever will not help a clutch to operate properly. I would also have the clutch checked as it could be the friction plates are worn and/or the spring tension is incorrect. (Wrongly adjusted or weak springs will also not help the situation)

When going about 50 mph, turn throttle fully open. If clutch is slipping, engine will rev but speed will not increase very much.

Dead spot on the starter or possibly bad neutral start switch.

I would guess 0.040".

Well one area I recommend you to check is the power jets in the carb. Overall check your jettings because you are starving on high end. To test try closing your choke half way and see if that gives you more pull ower over 6K rev. Good enough?

Where does the source of oil appear to be coming from?

check battery connections,check main fuse

There is a vaccum fuel valve, that shuts off the fuel when not running, if that line has a crack or leak it will not let fuel into the carb.
The only thing I can think of w/o more info

turn it counterclockwise until it reaches 1000rpm.