Tires-R27

I recently changed tires on my R27. Some DPO had a 4.00-18 on the rear. It had rub marks from being too big, and both tires were weather checked. I fitted a modern 3.25-18 Continental on the front and a NOS 3.50-18 Continental on the rear. I realize that the rear is still over-sized compared to OEM specs, but the end result is that the transmission is less troublesome and the bike handles so much better. Why? Would a 3.25-18 on the rear make a marked improvement?

I'm not sure "New-old Stock" is something I'd want to use in a tire.
Tires get hard with age and unless you're talking about a bike you want to put on a stand and admire, I'd suggest new rubber.
Then again, if you used the term to describe some new "vintage styled" tires, nevermind.
As for your question, I would quess there might be a small improvement with a 3.25. But you might have a hard time finding one. I just went through that with my /5. Closest I could find was a 3.50 Michelin Mac 50.
But I experienced the same thing as my brother had fitted a 4.00 when it was all he could find on a trip when his rear tire shot craps.

I had the same experience when I went back to a 3.50x18 from a 4.00x18 rear on my R60/2. The bike is much more sprightly, even though mathematically there shouldn't be a great deal of difference. Even so, I can use 4th gear in a lot more situations where previously I'd have had to shift down into 3rd...