OK, pull the lower unit one more time!
I suspect the L/U is already in Fwd gear so what you want to do is turn the shift shaft CCW until you get some resistance. You'll still be in Fwd gear.
Turn the shaft CCW a bit more, with a pair of suitable pliers cushioned with tape or a shop rag so you don't mar the shift shaft splines. As you're turning more CCW you'll feel a "notch" which should be Neutral. Verify by spinning the propshaft.
From Neutral, turn the shift shaft further CCW thru a bit more resistance and when you turn the driveshaft the propshaft should rotate in the reverse direction. Note that as you're shifting to Reverse gear, you may need to rotate the prop a bit to get things aligned.
If all that works, and you have your gears + Neutral, it's time to get 'er installed. Turn the shift shaft clockwise thru Neutral, and back to Fwd. Align the shift shaft so that it's just getting ready to shift to Neutral, but is still in Fwd gear.
Take your lower brass reverse lock cam and line it up on the shift shaft as per the first diagram. You can see how the brass cam aligns with the stud on the Port side of the unit.
The upper reverse lock cam "nestles" into the lower cam, such that the 2 "tabs" on sides of the cam are pointing 90-degrees from the centerline of the gearcase. Such that those ears will fit in the corresponding slots in the mid-section when you're installing the lower unit.
Before you reinstall the L/U, disconnect the shift cable from the shift arm at the motor pan.
Position the motor's shift arm all the way aft. This is the correct alignment for installation and corresponds with Fwd gear.
When you're reinstalling the L/U, make sure the copper water supply tube engages the pump's rubber grommet. You may have to "jiggle" the motor's shift arm just a wee bit to get perfect alignment with the shift shaft spines, as you're pushing the L/U home.
Once you have the L/U mated to the mid-section, check your shifting action at the motor.
When this is correct, shift the control box and motor end to Neutral and connect your shift cable. There should be a slight amount of "preload" on the cable, pushing to Neutral. Once this adjustment is good, Reverse should work properly as well. Adjust the ferrule on the shift cable as needed.
Hope that helps, let us know what happens............ed
p.s., hey it's late and I just realized you might have the later-style shift cam design. If it doesn't look like the 1st 2 pictures, see the last pic for proper alignment. Shift to Neutral and install the cam as shown in the picture.
Note that in either case, Mercury locks the motor down in both Reverse and Neutral. Only when the L/U is in Fwd gear is the reverse lock released.