With the transmission out of the car, the engagement lever will usually only be able to move if the transmission is held in the upright position as it would normally be installed in the vehicle.
If it is in any other position the shift pawl will move into the blocker ring and prevent the shifter shaft from moving. It's probably OK. There is also a rare possibility that the solenoid is stuck in the engaged position.
Fred

Also, that lever is not a neutral or a freewheel control.
With it pulled foreward the OD is locked out and the transmission acts as a regular 3 speed.
With it retracted to the rear it allows the OD engagement along with the electrical components.

Last edited by rfs56trk; 07/31/2016 6:04 PM.

1956 3100 Pickup/Red/350/3sp OD/PS/Disc Brakes
1957 Bel Air Sport Coupe/Red/355/TH350/PS/Disc Brakes
2017 Silverado LT Single Cab SB/Black/5.3/6 Speed Trans
1947 Willys CJ2A w/F-Head engine