Mark wrote:
I can't turn the drive shaft more than a wiggle.
The shift is just a splined shaft which can be turned using a 12 pt box
wrench. According to the manual turning it fully clockwise is forward. It
seems logical that it is a spacer problem allowing the fwd and reverse gears
to both be touching the drive shaft at the same time.

Not possible the way you are describing it.

The forward & reverse gears are in constant mesh with the pinion
already... and ride on the propshaft... the clutch "dog"("clutch" in
Merc Speak), which is splined to the propshaft, slides at the command of
the controls(cable(s), shaft, crank, & spool)forward for forward & aft
for reverse, on those splines, engaging either the forward gear or
reverse gear to the propshaft. See:

http://www.boatdesign.net/gallery/sh...sort/1/cat/511

For a pretty good diagram. With a new impeller installed, you should
turn the input shaft clockwise ONLY, no "wiggling" back & forth. The
condition you describe could be the impeller binding from the impeller
vanes being bent in the wrong direction.

Rob