I feel your pain. I did a similar swap, a KZ1000 electronic into my 650, see the link below.
I got it going last year, but it soon died on me. I found when I tested the IC Igniter, the Red wire failed it's resistance test. I switched back to the points set up for the rest of the year. I made everything plug in, so the swap back and forth was easy.
I found another IC Igniter, and tried to set up the electronic system again this Spring, but again it did not work right. Frustrated, I've put the points on again.
One problem I found, as I had to make the backing plate from the 1000 smaller to fit the 650, is that my mounting holes were not spot on, and the gap between the advancer lobe and pickups were different. I had a larger gap on the left pickup compared to the right. So some adjusting of the mounting holes solved that problem and seemed to help.
I read in a post above that 2.5 ohm coils need to be used. I used stock '78 650 coils, not sure what ohms they are off hand.
Maybe I will try to touble shoot it again, but for now she's running great with the points, so I'm not in a rush.
Rob
CANADA
Need a key for your Kawasaki? PM me
1978 KZ650 C2, 130K kms, Delkevic ex, EI, CVK32, PMC easy clutch, ATK fork brace, steering damper, braced swingarm, 18" Z1R front wheel.
2000 ZRX1100
2011 Ninja 250R
2005 z750s