I think the spacing collar between the engine crankshaft bearing and engine sprocket on the G3L is stuck and is a very strong fit. I think that the previous owner may have used a non original part. Leaking lots of oil from here. Please advice on how to remove this?
From my experience of Matchless engines and the bodges people are capable of, it looks to my jaundiced eye as though this is not the correct part, in fact I wouldn't be surprised if its part of the outer bearing in some way. Those spacers are generally a loose fit but should not wear anyway.
From the look of the worn splines on that shaft you may as well resign yourself to an engine strip and see just what has been done inside.