KT Lock vertical shaft/locking pin problem

[kwinton80]

I have a 1976 24ft rear-door Argosy. The PO did quite the number on it, so pretty much everything on it is having to be repaired.
The issue that I'm currently up against is our KT door lock. The exterior portion is in decent shape, but the interior handle and locking pin were missing. I've ordered replacement parts for those, as well as a new key mechanism.

I took it all apart today and lubricated everything. I got the new key mechanism installed, correctly I hope. But the vertical locking shaft seems to be jammed. From what I can understand, it's supposed to move up and down to engage the lock. I sprayed it liberally with WD40, but it hasn't budged. I tried lightly tapping it with a screwdriver and hammer, but I didn't want to warp anything.

The other issue I'm having is that it seems like the locking pin doesn't seem to fit into the hole. It's like it's slightly larger than the hole. I took a small drill bit to see if anything was broken off down in there, but that didn't seem to make a difference.

Any help would be great!
Katie

[DryFly]

The KT locks are made of pretty cheap material, so don't force anything or you'll end up with a useless $$$$ pile of stuff. The good news is they are pretty simple locks.
Photos would help.