Wow... BINGO.... That plate is supposed to lock the shift cable into place into the drive itself. It is supposed to be held in with two
short hex head bolts. Unless locked in place by ths plate, the reverse interlock ( and shift) won't work properly. These are a bit of a pain to tighten since you can only get an open end end wrench ( or a combo open/box) wrench in there and tighten/loosen it one or two "flats" at a time. That plate has a "U" on one end that is supposed to engage the annular groove in the shift cable juncture between to flex cable part and the rod. To fix this... Open back cover and disconnect the shift cable from the mechanism ( remove cotter pin) Then remove that "plate" completely. If you only have one bolt, use the other one to find another one. Best bet is ebay. Better yet a local Volvo Penta dealer. If you are lucky, you may find an exact dup at a good HW store, but HW store stainless is crap and will rust. Clean crap out of the recess in the back of the drive that this "plate" sits in... Insert the U on the plate over the annular groove on the cable and insert the cable fully, seating the plate fully as well. Insert bolts and tighten fully. THEN follow exactly the instructions for shift adjustment. While you are underthere, use a small S/S wire brush to remove the marine crap from the "spring catches" and the mating surfaces... Lube with a thin smear of waterproof marine grease. Good luck. AS best you can, inspect the drive bellows.... even a pin hole can be expensive.