No, XS650D, that wobble is not something inherent to your motorcycle. My D will redline in 5th with 17/34 sprockets (yeah, the motor's been breathed on) without instability. TwoMany has given you some good advice. Here's some more.
Understand this: specifying your preload setting is meaningless. What signifies is laden sag. If you want the procedure for measuring this, Google Total Control Training, go to their site, and download their excellent "Suspension 101" handbook--it's free.
You haven't mentioned anything about what shocks you're using, how you installed and inspected the Oilite bushings in the swingarm, what steering head bearings you installed and how you adjusted and inspected steering head tension, whether or not you're using a fork brace and if so how you installed and inspected it. Check those topics as well as the links TwoMany gave you; they've been discussed.
One issue that often crops up is that the flanges on many aftermarket swingarm bushings are thicker than the flanges on OE nylon bushings. This leads to a problem. The inner bushing (tube) on the swingarm axle is designed to lock against the thrust plates in the seals and brace the frame, so that the swingarm with the outer bushings is free to rotate around the inner bushing when spec. torque is applied to the swingarm axle; in other words, the swingarm has to have some side play, and to achieve it, the inner bushing must be longer than the end-to-end width of the swingarm (I like to see between .006" and .008"). With thicker outer bushings, installers sometimes compensate by using far less than spec torque to leave the swingarm free to move. The result is flex at the swingarm pivot, which can and will cause front wheel oscillation. The best way to recover lost side play is to remove a small amount of material from the chamfered edges of the swingarm holes, allowing the outer bushings to seat more closely. The swingarm material is fairly soft, and a few strokes with a flat file is usually all that's needed. Swingarm side play specs are in the factory manual that you can download free at
www.biker.net (thanks again, Jean Akers!) A good 12" caliper is your friend.