77 KZ750 twin must use a battery of some sort. The type of alternator on your bike is much more efficient than the premanent magnet type, but the down side is that it needs a battery in order to work.
You can use a really small battery if you want. Some people are using little computer backup batteries. I've put a 50cc Honda Spree battery on some KZ's with your type charging system and it always worked, even when the battery was totally dead (kick-start only of course).
On the KZ twin forum there are many more threads on the subject.
www.armbell.com/kz400/index.php?sid=c35c...fcc2365&mforum=kz400
I'm not sure it's possible to swap alternators, but if you can install a 78 or later alternator, you can go without a battery. You would just use a capacitor in place of the battery. That's what I did on my 550. There are two in the photo, but I only use one of them.
In the background of the photo, you can see a 76 KZ400 with one of the Spree scooter batteries hanging down under the seat. We hadn't painted the battery holder black, yet, in that photo.