I agree that the U seal on the t-covers is probibly the leak. I have used Three bond 1211 on them and seen the cars years later with no leaks.

This sealer is made for sealing two troke engine cases and if they leak it blowes up.
I have used it many times and think its the best.

It can even seal a Subaru engine case so it won't leak!!!!!

When you go to places that sell stuff for two strokes they will try to sell you what they have but don't fall for that get the real deal. Can you tell I like this stuff?

I haven't bought any in a few years because I got 5 tubes last time and just did a serch to show you its out there and you may be able to get it localy not sure. I have bought it from Dennis Kirk in the past.

http://www.threebond.co.jp/en/product/series/sealants/1200list.html

http://www.vitosperformance.net/TRX250R.HTM#SEALANT

http://www.denniskirk.com/jsp/product_catalog/Product.jsp?store=Main&catId=513&leafCatId=51304

As far as what should you also do. Just do as many parts that are known to wear out as you can possible pay for if you have access to them while you are in there and maybe you won't have to take it back apart in a long time.

Like the water pump if it has more than 80k on it or has been expossed to the green coolant its less painfull to do it if you are already doing some work and would suck to do it 6 months after you get it all back together.

Good luck........Dave