"1)Trim the drive all the
"1)Trim the drive all the way up (trailer position), or as far up as it will go without causing any more damage. It should be in this position for removing the lower unit anyway.
2) Look at the front (leading edge) of where the lower unit mates to the upper unit. Just above the joint there is a cavity. Inside the cavity you will see a small tube for the speedometer... disconnect it and pull it back out of the way. Behind it, you will see where the two parts of the shift lever come together. The lower section coming out of the lower unit has a 90° bend which, when lined up, slips into the upper part, which has a plastic recepticle.
Are those two peices together? or aren't they?
If they aren't, it doesn't makes sense that the shift lever,inside the boat, could be moved through its full travel of forward to neutral to reverse like you mentioned above. If they are lined up, the binding is being caused by soemthing inside the drive.
One posibility for this binding is the vertical drive shaft splined end is stuck inside the driven gear in the upper unit. That driven gear, through a drive gear, another drive shaft, a couple of u-joints, yet another length of drive shaft, the engine coupling and the crank shaft, is connected to the vibration damper on the front of the engine.
3) Wiggle that back and forth (a quarter turn each way)... you'll need a socket and a breaker bar. Pull the spark plugs if you feel so compelled but I don't think you really need to. It's not like you're going to make several revolutions. If you want to go for it. This will, maybe, loosen any tension between the vertical drive shaft and the driven gear, and the lower unit will fall off."