1994 XLT would be the 579cc fugi engine, they were a bit prone to crank failure if you put pipes on them and ran them at high RPM from what I can recall.
DO NOT run fuel with ethanol, ever. It was cause all sorts of havoc on a snowmobile, let alone a 2-stroke engine.
Secondary clutch; if it can wiggle axially along the jackshaft it is fine, just take a 1/2 wrench (hold the brake down) and make sure the bolt is tight. That little bit of slop is to let the clutch "float" and align itself.
"white stuff on plug": white goo on the plugs is usually a sign of a coolant leak into the cylinder. While it's cold, pull the cap off of the coolant bottle. Start the engine, if you see bubbles (or a geyser) you have either a base gasket or head O-ring leak.
If you’re looking to do some reading you may find some info here:
http://www.hardcoresledder.com/forums/314-trail-classic-xlt/
If you’re looking to bullshit about sleds while trying to find info, looks here:
http://slednutz.com/