We made sure it.was at 12 oclock and locked ccw in fwd.. it goes into.fwd but light grinding even at 80% throttle ( only tried a couple times for 2 seconds each ) reverse is good normal grinding and goes away quick.. but engine still dies in fwd and reverse most of the time..Well, were narrowing it down.IF fwd has the shoe in a straight line and you still dont have good fwd engagement you need to remove the drive
Something is still binding. With the drive removed there is no resistance on the lower cable and it must move freely. The shift slide is connected to the lower shaft by the arm with the roller, that must move freely.
If you have all these things correct and fwd is still not engaging correctly go to the drive and move the brass shoe fully clockwise.If MUST BE AT 12:00 ,in a straight line .Not 12:30, not 1:00 with the prop locked in a CCW direction
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If the brass shoe is straight and the prop is locked your in full fwd gear? If you hear grinding its not coming from the lower unit. If a bearing was going bad you would find metal chips in the drive oil .
Ok, lets start from the beginning.
Have you removed the drive yet to examine the shift components?
Have you open up and read the procedures in the link i provided?
Do you have the GEN II manual?
The so called cable in the second pic is your speedometer hose that is attached to the round plastic fitting