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Well??

Update? Did you remove the front propeller shaft and try it? Sure sounds like a front drive, poppet valve issue.

Update?

No you do not have to go reverse to first, the air valve operates off the first reverse shift rail, but shifts just coming our of reverse to neutral. BUT, be sure it moves (the sprag clutch ring in the transfer.) Simple way to check all the front drive is to remove the front propeller shaft, if...