Yes, if power to O/G and ground to Bl/B makes the Neutral light come on then the gauge is good.... I can get it to light up if grounding the BL/B wire and tuning on the bike so the O/G wire has power. Means the part you mentioned about the problem with the neutral switch is prolly the cause but no clue where to start there.
Either the neutral switch is bad, or something is wrong with the Bl/B wire.
Try remove and inspect the Neutral switch, it is located under the L.H. side cover just beneath the front sprocket. You may have to dig through chain lube grease to find it.