Hey, if you want to go for it on a 650sx, then go for it. Don't let me be the voice that stops you. I think you can roll a 650sx. Pipe, carb, bump the compression, so port work, a prop, all of the things you'd do to a 701 you can do to a 650sx, and the parts are probably cheaper. Also, the SJ doesn't have a weight advantage over the 650sx like it does other kawi hulls.
The problem with 650sx is that it has price advantage over performance advantage. The 650sx is cheaper, and has lots of older parts available for cheaper. The motor is a better platform for bottom end than other motors. The problem is that "better" is a relitive term. The 650sx may make a higher percentage of low end power compared to it's whole range of power, but it doesn't make more bottom power than the 750/800 motors, just a lot less power. The 650 makes more power per CC, but still makes less power than the larger motors. Am I making sense?
The Yamaha motor is just a better platform. You are going to get more out of a worked 701 than you are a worked 650. yeah, the pipe for the kawi 650 is going to be a lot cheaper than the pipe for the yamaha 701, but the motor work is going to be the same price, and the cheaper 650 part is probably going to be older and more busted than the SJ parts.
My 2004 SJ is all stock, and out performs my old 650sx (44mm carb, prop, ride plate, intake grate). The power is similar, but the handling is vastly superior. The 650sx could outperform it with a pipe and a milled head, and all for less money. However, if I put another $2000 in my SJ, it will be far superior to any 650sx you are going to want to ride. All said and done, my SJ may be $5000 and your 650sx may be $3000, but my SJ will vastly outperform your 650sx, have a much higher resale value, will be easier to part the AM parts (putting it back to stock would be the highest resale) and every day at the lake, you'd be asking me to ride my SJ. And I have a 2004 SJ, go with a 1995 701 motor, and you might have only $1000 more invested in it than a 650sx, but will be almost as nice as my RN.