How do you do a head gasket on a 81 yamaha xs650 and do you have to take the engine out of the frame?

yes, you have to take the engine out of the frame. there are good videos on YouTube of how to remove the heads/jugs/etc

if your gasket is leaking, you might try re-torquing the heads first though which might fix it. you can do this with the engine still on the bike but you have to remove the gas tank.