I recently changed my rear indictors on my TTR 600 after losing a lens and not being able to get a replacement.
I assumed it would be a 10 min job but had quite a few silly problems over a couple of weeks.
While driving switch on indictor and engine would miss a beat.If bike is just ticking over (low revs)and switch on indictor engine cuts out.
If you remove wires from rear indictor and touch them together engine cuts out.
My problem was that even though I had used proper connectors and taped them up I then taped the wires together but they were shorting out even through the tape, so i just untaped the wires and all is fine.
I would think your wires are either to close together or worn throuh some where.
I would think if the live wire to the rear was worn through and earthing not only would indictor not work engine would also cut out when that indictor is switched on.
My bike has same engine as xt but no battery if your bike has battery it might be a different problem.
Also my bike is kickstart only and wont start if lights are switched on.
So i think the generator only produces minninum power.
John
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