Teresa,
Since you've already checked the cables, the problem has to be in the control assembly or at the engine & transmission. Verify the throttle and shift lever at the engine / transmission operate freely without the cables connected. I suspect you may have a problem in the control unit. I had a similar problem on Rhapsody. I ended up disassembling the control unit. There were places where grease had become tar and dry surfaces with lots of friction. A wire brush, solvent and coating all the parts with fresh grease fixed the problem. The knob that is used to disengage the transmission is connected to a shaft that goes through the center of the controls. This shaft is a path for water into the control and should be well greased before reassembly. Watch for the little spring loaded ball bearing that fits into recessed dimples to give positive indication that the shift lever is in the correct position. I had to go bilge diving head first to find that little rascal when I pulled the assembly apart.
Good Luck!
Bill
Rhapsody #348