1961 Evinrude Fastwin 18 HP not shifting

We picked up a 1961 Evinrude Fastwin 18 HP engine last week for our aluminum V-hull, and took it out today to give it a spin. Unfortunately, two problems plagued us pretty much the whole day. Luckily, I had a trolling motor with me, so we were able to get back to the boat ramp. Excuse my poor engine lingo, as I'm not a mechanic by trade or hobby.

1) The engine would not stay running unless the choke was out. We got the fuel lines, bulb, and tank with the engine. I filled up the 3 gallon tank today with fresh gas and put a 24:1 oil mixture in. If I turned the tiller to "shift", the engine would die unless I kept the choke out.

2) The engine would not shift. The shift lever seems to work, but putting it in forward or reverse doesn't seem to do anything. I can hear the engine going, see bubbling water (which I assume is the water pump), but we don't "go" anywhere. I did manage to get it going forward one time, and we were moving at a good rate of speed, but the engine died about 30 seconds into it. I took off the cowling and see where the shift lever affects the engine, but I don't see it actually "doing" anything when I shift it.

I'm not above tearing the thing apart, so I just need some hints or pointers on what to look at first. I plan on replacing the lower gear oil today. Any help would be appreciated.

I bought some engine cleaner and sprayed it on all the mechanicals while trying to avoid electrical stuff. I scrubbed it down real good and rinsed it off.

I gapped and installed new spark plugs.

I checked the lower gear oil. The oil that came out had water in it. It was probably more water than oil. I let it drain well, then replaced the gear oil by squeezing the gear oil in the lower hole until it came out the upper hole. I then replaced the upper screw, then the lower screw.

I filled up a large trash can with water and rolled it under the engine. The water was well past the lower cavitation plate but below the upper water exhaust hole. I started the engine, and it seemed to start easier and run a little longer before dying. As long as I gave it a little gas and didn't let it sit too long at idle, the engine would stay running. I shifted into gear, but the prop didn't move. I tried several times with both forward and reverse. No water ever came out of the top hole.

I then checked the spark by disconnecting the wire from the spark plug and attaching the plug end of the tester. I used the clamp end of the tester on the spark plug itself. I touched the battery, but saw no spark. I tried several times, but the upper wire didn't deliver a spark. The lower wire worked fine, and the spark would jump a 1/4" gap.

I didn't check the compression, as I don't have a tester, and the local automotive store didn't have one to loan at the time. I imagine I have bigger problems that that right now, with no spark on the upper wire, and a bunch of water in the lower gear oil.

So, is the engine worth salvaging? Is it a complete rebuild? I'm a troubleshooter by nature, but certainly not a small engine mechanic. I'm left wondering if it's going to cost me more to repair everything than it would to buy another newer, working engine.

Is the shear pin Broken??? When adding gear oil, add from the bottom until it comes out the top and quickly replace the lower plug.

I was able to rent a compression tester from Auto Zone. The readings are (top, bottom):

45, 50
44, 48
44, 50

@ Bobbyc - I took the prop off and checked the shear pin, and it's fine. Rusted, but fine.

Double post.

I agree that the difference in compression between cylinders is important, but shouldn't the pressure be no less than 60 PSI to run well?