Everything operates as it should except that turning the handle only moves the "deadbolt" about half the way. The lever that moves when you turn the handle has a curve in it. And there is a large cutout in the deadbolt that the lever moves in. I am guessing that the lever originally had more of a hump in it and as it has worn it does not move the deadbolt as much. The lever itself moves as far as it can before it bumps into the lock. And yes the lock is in the upright unlocked position.
