I have a bunch of these 1541 drives for the C64 and C128, two of them weren’t working. Every time I tried LOAD "$", 8 it gave me a FILE NOT FOUND error.
At first I thought it was a dirty head, but in fact the head was busted, I had to replace it.

I’ll show you how to replace it, but you’ll need another working disk drive to align it.
Tools needed:

• Screwdrivers.
• A working 1541 or 1571 disk drive.
• New Head replacement.

Let’s start by removing the top case, the drive has four screws in the bottom.

Now with the case open, we need to remove the metal shield.

The main board is exposed, remove the screws.

Detach all conectors.

One easy way to tell if the read/writing head is broken is testing this black connector with a multimeter. It should have continuity between all the pins. Let’s say you try pin 1 and 5, they should have continuity, pin 2 and 3, continuity, pin 2 and 5, etc.. If one of these combinations don’t have continuity the head is broken.

Set aside the metal pin that connects the lever with the disk drive mechanism.

Now remove the 2 top screws that retain the head.

Cut the zip tie that holds the wires in place.

Keep removing parts as in the photos.

These 2 pieces of metal holds the rails in place.

We need to remove this spring, be careful not to lose it.

Now remove the screw that holds the metal strip in place.

Head removed!

Now we need to remove the metal chassis from the plastic case.

I removed the drive from the chassis for a cleaning, but you don’t have to, you can assemble the head and align the drive with the drive in the chassis.

Drive and chassis with power supply separated.

The new working R/W head. To install it, follow these pictures.

Tighten the screw and lock it with nail enamel.

Add one drop of oil to each rail.

Put a new zip tie to hold the wires in place. Remember to leave enough room for the head cable to move.

I’ve removed the stickers because I’m gonna retrobright this thing. Check the difference in color.

Don’t forget to plug all the connectors to the main board.

Ok, now comes the drive alignment part. Loosen these 2 bottom screws that holds the motor in place. We just need to loosen them enough so the motor can move with our hands.

This is why we need a working second floppy drive, because we need to load the alignment program. I’ve used here the “Free Spirit Alignment software”.

Notice how I’ve placed the drive on it’s side. This is for a better access to the motor that we need to align. Also be careful as the power supply contains high voltages. 

Load the program and follow the on screen steps. It’s important that you know the disk you’re gonna use to align the drive is aligned itself. I’ve used an original Commodore 1541 Test Disk.

When you hit this screen start to move the motor with your hand, in one direction and then the other until you can read “ALIGN. CONDITION: Excellent” or SATISFACTORY. 

Moving the head back and forth until alignment is met.

After the alignment is done, lock the screws in place with nail enamel. It’s important not to move the motor when you tight the screws.

That’s all! Now we have an aligned 1541 floppy drive. Some guys will say that you need a special disk that was recorded in a certain way to be able to align the drive, some other will say that you need an oscilloscope to do it, Although these things are true, you can align the drive by hand with a known good floppy disk. I did it and I’ve recorded disk using the drive and then tested them on another 1571 drive successfully.

If you have any doubts, comments, feel free to ask.