Is the trans pump orientation correct for the engine rotation? You can also tee in a pressure gauge on the trans line to the cooler to check pressure.  

BTW, I get the Lucas out and then get a new "friend" 

I'll answer this with a quote from Tommyboy in his first post Pete

Tommyboy1904 wrote: My velvet drive was slipping, so I rebuilt it, on 1st test run engaged rev. Perfect. When shifting to forword it slipped slightly the engaged. Out on the water for slipped a little to engage once engaged worked fine.

If it was oriented wrong the boat never would have gone into gear to begin with

I think you'll soon be into teardown number 2 because your issues are internal to the transmission 

By your description,you had the problem before the Lucas was added. The Lucas doesn't turn the fluid into a red Jello like substance that plugs up stuff and makes it quit flowing.

From the sounds of it, it must not have gone into reverse either if your pump isn't working

You should probably ignore Pete and hang on to the friend  

I think the problem area will be your forward clutch piston/cylinder that compresses the big convex spring to compress the forward clutches. A bad seal or O ring could let it get cocked and let lots of flow past it.

The line to the cooler having no flow could be because of this too since the cooler only gets oil that is diverted by the pressure regulator/shift valve to maintain operating pressure in the transmission. If it's having a hard time maintaining pressure it would divert nothing to the cooler supply line.

Or maybe the pump is dead, but it would probably bind up, break and not turn at all and keep the engine from rotating too.

I could be all screwed about this too, but I suddenly have this urge for some red Jello and whipped cream 

Only goes in one way and they usually don't have any issues. It's a beefy little spring in there that needs a special tool to compress.

You never did answer whether it goes into reverse at all 

The manual tells how to check the line pressure in Forward, neutral and reverse, no T's into cooling lines like somebody mentioned above, just a gauge that reads to 200psi and a couple of adapters for the gauge. The test port for forward and neutral is right near the cooler supply line fitting and it's 3/8 npt threads. The reverse port is at the top at the very front of the transmission and is 1/4 npt threads.

One question that may come up is how did you "force" it out of gear? 

Do you have a manual?

There's a pretty good explanation of the oil system with a diagram. Different manuals have it on different pages but it's there.

Hook a 0 to 200 psi gauge to the forward/neutral test port and rev it in neutral to 8 or 900 rpm and see what it reads. (135 ish would be a good representative number)

Then shift it to forward and see what it reads. Should stay at the same 135 ish, if it drops a lot, then there's a lot of leakage by the forward piston/cylinder

The plug in the test port has probably never been out and it can be a real bear to get it out.

Same for the reverse test port, it can be a bear to get out.

If you have zero pressure in neutral your pump isn't working at all.

I'd probably just shift it at the lever with the cable disconnected 

KENO wrote: The plug in the test port has probably never been out and it can be a real bear to get it out. Same for the reverse test port, it can be a bear to get out.

Heating the plugs with a set of torches loosens things up pretty good usually.

Then putting in a couple of brass plugs with a hex head make life easier

I think you really meant to say " I'll be back to let you know what I find when it's apart" 

I don't see it mentioned. What model Velvet is it? Did you put the same number of clutch plates back in the trans that you took out?