Spud.... I've never encountered a problem in installing one of those gearcases, BUT just to refresh my memory in case I might have forgotten something, I read over the complete section that pertains to that engine's gearcase from removal to installation.
When it gets to the installation section, it simply states to guide the water tube into the water pump grommet and the shift rod into the shift rod hole..... and nothing more. If the gearcase is full of lube, I'm wondering if you're encountering a hydraulic pressure type thing, and if so, drain the gearcase and leave the top oil level screw out as a release valve.
The only other two possible conflicts I can think of would be that the shift rod isn't at its lowest point, or possibly the water tube is hanging up on the gromment at the water pump.