I drained the oil out today because it smelled like gas. I wasn't getting any spark and found that the magneto was full of oil. Now I have spark but it still wont start.
Hi jwhistl, that sounds like a wonderful find you have, it's rare to find a bike that old with such low mileage and in good condition. If you don't have a shop manual, you can download a free scan of the genuine Honda manual here:
http://www.dotheton.com/downloads/Honda%20CB100%20CB125%20CL100%20SL100%20CD125%20SL125%20Workshop.pdf
The alternator rotor and stator coils are inside the crankcase so they do run in oil, that is normal. The bike has battery ignition and the battery MUST be in good condition and charged to have spark. The alternator can create enough charging current to produce spark even with a weak battery if kicked over fast enough. But these bikes do not have a voltage regulator. Instead the battery acts to control the charging current. And if the battery has cells shorted with sulfation and the bike does start the charging current will be extremely high which can burn out light bulbs, fry the rectifier, and damage the coil. So step one is to make sure the battery will charge up to 6.5 volts and maintain 6+ volts while sitting overnight.
After that, set points gap and timing, then check into the carburetor. If it was stored with old gas in the tank and carb then you will need to thoroughly clean all passageways in the carb, check float level, clean out the petcock and filter bowl, and make sure the tank is clean and free of rust or crud.
Oh, and you will find an excellent checklist/discussion of carburetor cleaning at the link below. Scroll down the the next to last post by user "Rizingson."
http://www.vjmog.com/ftopict-10204-k15.html
Let us know if you need further help,
-Bill