STOP hammering/forcing that mechanism, you can twist the shift-shaft and the everything will be out of wack
Racerone is directing you in the right direction
Do you know how to drop the lower-unit?
:facepalm:.... Have a read of what has been written. The gearbox is already off.
We are just confirming that the problem IS the shift rod bushing at the top...
widetrackman Short of lifting the powerhead, I would keep spraying things like CRC (5.56) and WD40 in there, and keep working the rod... Try not to use the hammer, and DON'T use the control cables... If you can make up a piece of flat plate with a hole in the end that you can attach where the cable attaches and use that to keep working the shaft...
I recently had a Mercruiser gimbal bearing that didn't want to joining the party. Bellows (non-genuine :facepalm

had split and allowed salt water in. Owner didn't bring me the boat for about 6 weeks. You can imagine the fun the little salts had with all those dis-similar metals! I had a 10lb slide hammer on it, and I was pulling that thing with all my might. After half a dozen hits, it didn't even look like moving. It took me an hour of repeated hits, about 1 every 6 or 7 seconds, before it started to move. The point is, persist.. If you show the machine that you have bigger balls than it does, it'll eventually give up...
Good luck.
Chris.......