Is it possible to change the final drive ratio in the reduction unit by replacing the drive sprocket to one with fewer teeth? I thought that wouldn't be an unheard of thing to do on this Honda, yet lots of searching on this forum and the internet in general didn't find me any references to anyone doing such a thing. I was actually thinking there might be someone selling a sprocket and a shorter chain for just such a purpose but I guess not.

If I wanted to do this, what would be the simplest and least costly way? Buy a properly sized sprocket and then have a machine shop put the right # of splines in it? (I'm assuming a machine shop can do that sort of thing)

1) Yes - I don't see why not
2) In my opinion - I would buy an "A type" sprocket and then machine out the center to fit the original Honda spline piece from the old sprocket. Then I would machine off those old teeth. Then weld the new sprocket on. The machine shop will know what you mean when you say "A type" sprocket.
Caution: You need 1/3 rd wrap on those teeth or there's not enough engagement.
Caution 2: Short chains wear very fast.
3) I think Honda uses an odd spline count - not sure but if a machine shop has to do this then it's gona cost big. They would have to make a custom cutter first and then labor.
CO

You could also try contacting Chris at CW racing. On Facebook he had information about different gear ratios for the fl250. It was awhile back but he is very knowledgeable and always seems to have parts stashed. He did a lot of racing with these machines back in the 80’s and 90’s.
Bob

This is the other possibility I was thinking about -- sacrificing a Honda OEM sprocket for the sake of its splined hub to weld another sprocket on to.

Bob: Thanks for the info on Chris as well.

or you could just put bigger tires on?

Dan Roberto (RPM) had a gearchange kit for the FL250. It is also a chain to all gearbox conversion. Ran one at a Riverside race. Worked great and strong.