Something is wrong. Both shafts should turn freely. Also, much easier to turn those shafts if the piston is not connected to the connecting rod.
My guess, without closely examining, is the balls in the rear shaft are not in correctly. Those balls will either pop up to lock the gear in place or fall into the shaft allowing the shaft to spin without engaging the gear. The pin that pops out of the rear shaft controls whether you are in high, low or neutral by how far in or out that pin is position. Because it's binding, I suspect the balls are your issue. Also check to insure you have all your spacer washers in place too.
You will have to split the case again and work through it. Try spinning those shafts without putting the other half of the cast together. Do you get the same binding?
Good luck and yes they should spin freely.