Take off the shroud and disconnect the linkage. Try moving the shift mechanism by hand, Neutral should be a solid stop between forward and reverse. Put shifter in the neutral position and re-adjust the linkage to fit the drives neutral setting. Hopefully that helps.
While not familiar with the forward drive, I would suspect based on what you state that the O rings on the drain screw needs replaced. I would try that first before tearing too far into it. Might be a cheap fix.
When you can pressure test the casing to see if there is an air leak from that area or any seals. If not, you should be ok. Just be ginger when tightening that nut.
I`ve been told that Mobil 1 has limited slip additives. I believe VP suggests non limited slip additives because of the cone clutch. I run Amsoil gear oil as it has water absorbing abilities.
When I replaced my 5.7 gxi, I went with a new Michigan Motorz long block. I transferred over my intake and exhaust, PS pump, alternator and water pump. I have ran it now for about six years and could not be happier. Might give their website a look.
