1994 Yamaha 130 no reverse

I have a 1994 Yamaha 130, model L130TXRS, that suddenly doesn't have reverse. Forward is fine and normal but simply no reverse, doesn't grind or do anything except not go into reverse. The propeller isn't turning at all when put in reverse. I was remiss in not changing the lower unit fluid and the fellow who runs this boat said last week that it "clunked" loudly when put in reverse. I hauled it last weekend and removed the lower unit drain plug--no oil but some water. I filled it with gear oil and it seemed fine to me in the test tank but Monday the fellow who runs it said it still "clunked" sometimes when put in reverse. Then Wednesday after running it several hours it suddenly had no reverse at all. I assume the reverse gear has gone out but it seems strange to me it doesn't grind or even try to turn the propeller. Am I correct that the reverse gear has gone out? An if so is the thing to do to get a rebuilt lower unit?

Running no oil isn't good. Running with water isn't good. I assume the lower unit needs a rebuild. It will have to come apart for further inspection.

With upper cowling off verify throttle cable is moving to reverse when you move control throttle arm from neutral to reverse. If good, keep in reverse and see what happens when you hand turn prop. If it spins then you've confirmed dog/clutch are not engaging. Btw, you should neve move the control throttle arm into gear when drive shaft is not spinning so run motor on muffs when testing.