That looks like the right manual. I see what you mean. I had a 27 that the gears had rusted together and after derusting, that area didn't want to mesh like it should. It seems like I could turn it so that it would mesh with the unrusted area. I don't remember if there was an adjustment to get it closer, or if the spring was what positioned the gears to mesh together. If I remember correctly, I took it apart and put back together several times to even come close to working correctly.
As far as preventing the needle from moving, I'm thinking that there is some dried oil in the clutch knob (friction nut) and hand wheel. I would probably take it apart and clean and oil.
Janey - Neat people never make the exciting discoveries I do.