I think the culprit may be one of three things, but they are all guesses at this point.
You stated you just bought the bike and replaced what you thought was a broken clutch cable, but you don’t mention if the “old” clutch cable was actually broken when you took it off. (Or if the clutch operated at any point in your ownership of the bike. ) If the old cable wasn’t physically broken, then the clutch may never have been worked properly when you bought it. But that’s neither here-nor-there.
One reason that the clutch adjustment mechanism is so far out of wack is that it might have the wrong length pushrod or a damaged pushrod that was installed by the previous owner. I’m pretty sure the pushrod is aluminum with steel contact surfaces pressed into both ends. One or more of the steel surfaces may be damaged. Or the pushrod is out if a kz550.
Or that the “throw out bearing” which is actually just a ball bearing that spins on the end of the pushrod is missing. Hence the gap that the adjuster is trying to make up for.
Or that the plunger that pushes the pressure plate is stuck/jammed in the engaged position, which means the pressure plate is stuck in the open position. I find this unlikely as there is a crazy amount of force in the pressure plate and that plunger would had to have welded itself to the inside of the transmission shaft. Again...very unlikely.
Once you remove the clutch cover and pressure plate, I truly believe you will find the ball bearing is missing.
Let us know what you find!
Throw out bearing is #22 and plunger is #23