By "turned to the out position" you do mean you pulled it out and turned it to hold it out?
Before engaging the layshaft with the left hand lever but having pulled the pin as you described the spindle should be free to move relative to the multistep pulley. (also with tunbler reverse lever in neutral.) It might be the bull wheel (big gear) is glued with grease to the face of the pulley or the pulley is jamed by grease or crud to the shaft.
If the spindle moved ok then confim the back gears on the layshaft also turn freely before they are engaged.