Thanks for the responses! I had trouble logging in thus my late reply.
The rear wheel is perfectly aligned with zero play, and the chain has proper tension and is well lubed. When I spin the wheel in neutral only the sweet sound of a healthy drive is heard. It's only in gear that the clunking/grinding is there.
K1w1boy, when I pull in the clutch lever, disengaging gearbox, it disappears.
Islandboy, I hope you're right! Even though chain and sprockets look good, maybe that's the issue. They have about 35,000 miles. And, yeah, the sound seems to echo from the gearbox as well as from the rear wheel, so I can't pinpoint the exact location the sound emanates from. But it's one or the other, for sure. Maybe a stethoscope would help before I shell out big bucks to pay a pro to open up the crankcase? Anyone used a stethoscope on their bike I wonder?
I should add, I recently changed brake pads front and back and the bad sound started sometime after that but I think that's just coincidence. Brakes work well and, I think, sound good.
Marylandmike, wheel was taken off bike a couple years ago, and it was put back on correctly.