nothing is going to be hurt other than performance by raising the final drive numbers (aka lower gear).
You could put too much stress on the drive train however if you go too low on the final drive number (aka raising the gear ratio).
Too tall of a gear will put too much stress on the trans and clutch..... where too low of a gear might cause more torgue than the axel can handle. but seriously I doubt a stock motor would have that affect.
I've already bought 20" ITP's for the rear and I do plan on dropping two teeth in the front to have the gearing a little lower than stock.
I will loose some top MPH, but I'm more wanting this bike to be quick and torquey for the dunes.
My wife's LtZ didn't even hit the rev limmitter in 5th at the dunes..... telling me even the stock ratio on that one is too tall for the condition I'm riding it in. I'll only be dropping 1 tooth on hers since it comes stock with 20" tires in the rear.
See if this helps some:
http://home.earthlink.net/~gellett/ltz400.htm
just as an example set it up with 18" Tires as a LTR simmulation (probably not the same gear ratios)......
example setup 18" tire 14t-36t = 74.81mph 5th gear.
My desired tire/gear combo 20" tire 12t-36t = 71.34mph 5th gear edited for proper gear combos I might even get the combos down to a 65ish top mph...... those were done with a 9000rpm redline.
That should only change my out of the hole speed a little. And if thats not enough to hit the limmiter in 5th then I'll fine tune by raising the rear teath count till I get the performance I want.
If this trans gets destroyed by these minor changes, then it doesn't deserve to be in the bike.