My guess is that the shifter rod is corroded at the coupler and so is sticking. Can you take the screw all the way out and flood with WD-40 as a rust dissolver solvent? Soaking, waiting, and a few a few light taps might help. According to my Cheap Outboards book the instructions you have seem correct. Lining up the mentioned pin lets you pull the lower unit down a bit more, but you appear to be past that point.
(My 3.0 HP has no shifter so it just pulls apart. )
Any rate, use anti-seize when reassembling all parts. Not the copper type, tho.