shift shaft problem
The only thing I can think of, which would still require the same action as suggested of taking apart the gearcase to realign the cam, is that the C-clip broke that keeps the shift shaft from lifting up and the shift shaft did lift up a little and the cam sprang out of alignment. Was the shift shaft turning freely around and around when you took the lower unit off again, suggesting it had popped up off the cam? Be curious to know what you figured out. I've gotten to know these Honda/Merc 96-98 lower units intimately as of late.
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