Need Help! New rear sprocket makes grinding noise
 

So I just installed a PBI aluminum 43 tooth rear sprocket and it is already wearing down on the outside. Its the side facing away from the tire. The chain seems to be digging into the aluminum and it has dug a groove into every tooth. Is the rear sprocket not in alignment with front or something?

That's a classic sign of misalignment... I wouldn't trust eyes only for alignment... Measure it...

Did you put the wheel spacer back ?
And dont run the chain too tight.
Ive seen chains so tight the rear suspension wouldnt compress. lol

I put everything back in place. The chain has about a half inch of play in it. How do I align it? Do I need another small spacer or something to get the wheel over further? Also ever since I put it all back together the rear brake caliper is moving back and pulling the brake line tight. Any opinions on that would help...

just a dumb question but just verifying you have got the correct sprocket (530 vs. 520 matched to the chain size you have ?)

for alignment you can search google for motorcycle rear wheel alignment and find a good description using strings. Assuming you have already aligned the indexing marks.

Something is very wrong if your caliper is moving.The caliper is bolted to a bracket that is between the swingarm and the wheel.The axle must go through the caliper bracket to prevent what your describing.This could also be why everything is misaligned.
Also,did you change the front sprocket? This can be mounted wrong and misalign the chain.

Also there is a block of metal welded to the inside of the swingarm. That block goes through a channel on the caliper bracket to keep it from rotating. Sumthin bad is going on here. Post a pic right and left of your back wheel.

1/2 inch of play is way too tight. The manual calls for 1.2 to 1.6 inches.
But you've got some other problems as well if the caliper is moving.

I really need to see these pics....... wow

I think it was exactly what hawkrider said because i forgot to put the rear caliper in the block on the inside of the swingarm. Everything seems to be ok now and haven't noticed any noise or grinding on the sprocket. Amazing what a simple stupid mistake can do. Thanks to everyone