OK, Jiggz, I'm about to get into this and make this adjustment. Given how much end float there is, the .110 measurement was taken with it in reverse, how much do you think I should turn those adjustment nuts? I realize you probably won't have an exact number but just a wild guess would work for me.
Since the evidence points to a slipping clutch dog in reverse, do the following before adjusting.
-First disconnect the upper and lower shift rod (remove pin) and test the lower shift rod by shifting it up and down to make sure there is no binding in either direction. Do the same with the upper shift rod using the throttle control handle. If there is binding, you need to fix this first before continuing on. I have a recent personal experience with the shift rod seal rubber dismantling and creating a bind on the lower shift rod. The system still shifts into fwd and rev but there is a very slight delay and grinding noise before doing so.
If there's no binding, reconnect the shift rods and do the following:
1. In neutral, mark the lower shift rod using the hole as the reference point.
2. Do the same when in forward and also in reverse.
3. Analyze the distance between the three lines, neutral against fwd and neutral against rev. They don't have to be necessarily equal since it could have been biased before. However, you want to know where you are starting with your adjustment so you can always go back where you started. And at the same time give you an idea if the shift rod is actually "too biased" forward.
Now go to the upper shift rod adjustment. Remember you need to make the shift rod move up more (which is the reverse position) meaning you need to move the stop nuts down. Starting with the bottom nut, make two full turns and do the same with the top nut.
Now check again the lower shift rod to see how much you have moved the shift rod or if it even moved at all. Since it's slipping I'll start at least 1/8" adjustment. And then just go from there for refinement. Do a test, even on the driveway on muffs you can shift into gear (just make sure all is clear and do not rev). DO NOT TRY DOING THIS WITH THE LU UNDERWATER IN A TRASH CAN! Of course, this is a no load test and not totally accurate. The final test should be in the water both on fwd and rev.
Let us know of your test results.