If it's like most other machines you'll have to take the hand wheel and clutch apart and give it a good cleaning so things move properly to release and engage the clutch.
Does the stitch length regulator move at all?
I'm guessing most of your troubles are dried oil in the machine. A good cleaning inside and fresh oil should get things freed up again. You might want to pick up some Tri-Flow oil. It seems to be better than regular sewing machine oil at dissolving old oil.
Rodney
Rodney