You can get OE cables from any dealer that sells Evinrude outboards from BRP; that's the parent company of Evinrude that bought the assets of OMC when they went bankrupt. You may need your model # to order a cable. It usually starts with 2 numbers that signify the engine size (ie 50= 5.0 liter) next letter is a 2 or 4 (2 or 4 bbl carb) followed by an M (manual steering ) or P for power. This was a sticker placed on the Thermo housing or valve cover.There are aftermarket cables out there too, but for this and other critical parts I like to use OE (driveshaft bellows, impeller, shift cable).
If your boat was originally powered by an OMC 5.0 Cobra, it would be one of these model #s, you can check through the parts section, they probably all used the same part # cable....
http://www.crowleymarine.com/1/OMC-Stern-Drive/1987.cfm
The cables can get sticky and cause shift problems and the bell crank can get crud behind it and not move far enough to fully engage the gear. As Bruce said if you changed from the points dist (Prestolite) to an electronic you must use an ESA module that will work with it. CDI electronics makes one. Have you tested it by manually lifting the load lever to trip the interrupt switch? This should drop your rpm from about 600 to about 450 to allow the dog clutch to release. If not this must be fixed before you try it again in the water.
If you are going to set up a new cable yourself, I strongly recommend that you try to find the original tools that OMC made to make the set up more accurate and easier. I got them from Crowley Marine in Colorado and they sell all the still available OMC parts. If you can't get the original ones then look for them on Midnight Wolf's OMC parts website, he sells them and also has updated adjustment instructions.
After adjusting the transom shift cable (the one disconnected in your pic), don't forget you also have to adjust the remote cable from the remote control, to ensure equal throw in both gears.
To keep water out of the bell crank area, what I do is:
With the outdrive OFF:
Have someone move the remote control fwd, n and reverse and clean out all the deposits. Then pack that whole area with OMC triple guard grease. There are 2 drain plugs in the pivot housing where the bell crank sits. One of them is a water drain for that area. Make sure that drain plug still has its rubber gasket and seal it up with OMC gasket sealer.
When you re-install the drive, clean the mating surfaces for the gasket really well. Then coat the gasket well on both sides with OMC gasket sealer.
After doing this I have not had any water in that area in many years.
While you're at it with the cables, check to see if the original control is getting loose and sloppy. If so you'd be ahead by replacing it with a new one. The lost motion in an old worn out control will exacerbate shift problems. The US Marine controls on many Bayliners were not very good. The OE style OMC shifters were much better. If yours is bad I'd consider something like a Teleflex CH 1700. While this adds to the cost with new properly set up cables, proper ESA, and a new control that boat will shift like new.
