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Interesting development. I followed fleetwin’s suggestion and assembled the lower unit minus a gear, then reassembled. Since I get confused about which gear is does what, I will say that when I assembled the unit with only what I believe is the forward gear, the unit froze up. That being the gear furthest from the prop.
When I assembled the unit without that gear, but with the other one, the one closest to the prop. The unit turned smoothly. So it appears we have an ill-fitting gear.
I also noted that the hole in the pressed-in brass/bronze bushing/bearing on the good gear does not line up with the hole in the gear. I assume this hole is there to facilitate lubrication getting between the bushing/bearing, and the prop shaft. How critical is it that these holes line up?