Took the tractor to my local servicing dealer 7/21. Worst case scenario: they had to split the tractor and the clutch pack is damaged. Unit must have been worked pretty heavy as they had not seen one of these before. New one was ordered (replacement not rebuild) and I should have it back later this week. Est. cost $2500-$3000. Kubota agreed to cover 30% of the repair cost so that takes a little of the sting away.
Thanks again for your input.
This is an older post, but a note worth mentioning. This is a common "issue" with the 8540 and 9540, and possibly others. It is usually caused by turning off a high-inertia implement, such as a bush hog where when the power is removed from the PTO, the blades keep turning due to their weight. Generally, when the PTO is turned off, the PTO clutch is disengaged but at the same time the PTO brake is engaged. The brake plate has one tab on it which kind of rubs against a lug that is part of the PTO clutch holder. After repeated use, the tab (which is harder than the cast iron holder) will wear, and at some point will wear both the brake plate tab and the cast iron pto clutch holder. Kubota knew about the problem many years ago. It wasn't a huge issue so long as the implement was turned off at idle speed only. Once the part is out of the tractor, you will see it, and it's obvious what's going on with it.
There is a way to check the clutch without splitting the tractor. Have to remove the hydraulic pump, right side of the tractor's transmission, and behind it is the PTO clutch assembly. You can feel around in there, the back side of it (engine OFF of course), and if the PTO brake plate tab is razor sharp or missing, it's likely worn off, at which point the tractor will have to be split to repair it.
The original parts are superceded to the new style clutch assembly which is the same clutch as the M9960 and M8560 PTO clutch. It is of a much better design. Instead of using the PTO clutch holder's cast iron "lug" (which was cast into the holder itself), it now uses a steel pin. The steel pin is much harder and tougher than the iron. Also the entire clutch assembly is MUCH improved over the old setup. Everything about it is improved. It costs quite a bit more than the original (don't have the numbers right off hand) but it should last a LOT longer than the original. If the tractor is going to be down for a little while, and the owner has enough to spend on it, it's highly advisable to install the new style clutch assembly rather than trying to piece the old one together.
I've done a couple of them. They are fun. Heavy, time consuming, but honestly not a hard job. Oh and expensive but it's an expensive tractor, and still better to repair than to fight with the new Tier 4+ stuff.