Small Engine Troubleshooting Problems? Ask a Mechanic Now.
Check the freewheel lever at the transmission. When the lever is pulled , it has a spring that does the pulling, then when you push lever in, it should return to drive. I think you will find it is stuck in freewheel, take a crescent wrench and put on the lever, and see if it will move back to run position!
With right rear wheel off, yo can see the lever on the tractor, I have one in my yard that had same problem.
Some WD40 on the lever, will help to free up the lever , so problem does not recur.
!! Good job! I thought you had checked that before!