I removed my light, but still employ the switch. sometimes it can piss me off. Like if I kill it at a stop light and have trouble finding neutral. But for the most part I like having it in there.
That being said...
If you have enough of the stock wiring left on your bike.
yes, the neutral switch is the ultimate ground point for your ignition (coils) through the kill switch. Along w virtually everything else on the bike. Starter relay and all that.
However you can remove the neutral switch and simply run the wire to ground...(BUT, you will be able turn (starter/engine) over while the bike is in gear. causing it to lunge forward unexpectedly, if your not on the clutch lever)
So, if you did remove the neutral light. you need to splice the light green/red with the black in order to keep the switch functional and circuit intact.
schematics
http://www.dotheton.com/forum/index.php?topic=47460.msg524993#msg524993