We found the problem. on the end of the shift drum theres a stopper cam to put tension on the whole assembly. In the bottom of the case there is a bolt with a spring and a cam follower on the end of the bolt that follows the stopper cam. The previous owner thought this was the oil drain plug, removed it and replaced it incorrectly. Instead of putting the cam follower on top they put the spring on top, which got jammed between the shift drum and the stopper cam, jamming up the whole mechanism.