Lower Unit Installation / Shift Shaft Aligment??

[88PartyBarge]

Today I dropped the lower unit of my 1988 Mercury 50hp outboard to install a new water pump. I am not 100% sure how to go about aligning the shift mechanism in order to re-install the lower unit. From seaching the forum, I learned that I should put the control in neutral and the shift shaft in neutral (is this correct?). There is another part that I am confused about .... it is a part that slides on over the lower unit shift shaft, it has an internal spline, and has a wall that protrudes up (flat on one side, angled on the other). What is this part? And how do I know what position to align it to the shift shaft?

Thanks for the help.