My 18 hp evinrude 1960 I recently picked up for a 22 rifle is kicking out of gear into neutral if i hold the lever it stays in gear but you can feel the jump from power to no power back to power.
The shifting problem sound's like a clutch dog issue. I had a 76 evinrude 25hp with the same problem. I had rounded lobes on the clutch dog. I reversed the clutch dog to make it work. It's been running fine for the last five years (now my brothers motor). Check the shift linkage, but my money's on it being a clutch dog issue.
forward is all the way up on the shaft and with the drop of an 1/8" from the stripped out bolt that might be enough for it to try and kick out of gear as neutral is down
got a 25hp longshaft lower unit to replace mine cheaper than a clutch dog and also has a 4 blade prop as well. My boat is a 69 microcraft that the transom was raised up flush so a long shaft is better suited.