I started by cutting the back of the rear subframe off and welding on a new hoop to give a nice clean rounded "butt" to the bike.
I realized there was a problem with the new hoop when I mocked up a seat with some carpet foam. I figured a standard size café/brat seat would look pretty good, so I went with ~2" of foam, but it looked horrible. The angle of the rear subframe on the LTD model of a KZ550 is steep to support a two-up "King and Queen" seat, not the style I was looking for.
I spent some time thinking about the seat frame, mocking up different seat options with cardboard, etc. After a while, I got so frustrated with making no progress I cut off the hoop, chopped the rest of the rear seat frame off, and welded the hoop back on. this gave me a much more aggressive look, and the proportions really started to come together.
Along with the subframe work, I grinded off the rest of the frame tabs I wasn't going to use and bent the old rear shock mount supports around the new hoop to keep the original lines of the bike. Happy with the progress so far.