When you tried to shift it 'manually' can I assume that you had disconnected the shift cable at the motor, that the linkage was in the 'Forward' position and that it would not move?
Have you just had the lower unit off and serviced the water pump? If so then the shift shaft may have been indexed incorrectly, the LU will need to come down so you can turn the shift shaft on the LU to the 'Neutral' position. Align the motor linkage and control arm all to 'Neutral' and reassemble.
If that wasn't what happened then the LU will need to come apart as most likely the cross-pin in the shift slider may have broken.
