The normal reverse lock out mechanism is inside the transmission as part of the side cover. You may have to pull the side cover to see if everything is in place as it should be. If it goes into low gear (1st) then the external part is working to shift the fork but the internal mechanism has to be functional to push the tip of the shift rail back. A person can also have a look at the reverse idler gear to make sure it's functional.
The link below has an illustration of a side cover parts break down for the Mercury overdrive but it is the same set up for all of the 259 series Ford overdrive transmissions. Notice the lever number 7292. It has a pin that holds it on the bottom and this is what is pushed back by the low reverse fork shift mechanism to, in turn, push the lock out rod aft. The shift rail is spring loaded rod assembly that is operated by both that lever and the cable pull lever to lock out the sun gear and disable the overdrive.
http://www.vanpeltsales.com/FH_web/F...br />
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VanPelt Sales has illustrated parts break downs for your overdrive set up if you choose to look at them. Mac VanPelt's web sight is very helpful and he has the best parts for these old cog boxes.