It is unlikely that rotating the shift lever is causing your balky shift problems. My 142 has a similar outer chrome lever stuck on the shift lever proper and held in place by a couple of rubber bushings. As the bushings age the outer lever becomes quite free to rotate and gets a little floppy - quite noticeable with the early 140 long lever. My lever would rotate enough that on occassion 1 st was down and to the right. As noted, there is a circlip at the base of the outer lever that has to be removed to pull the outer lever off. You don't need to remove the big nut on the transmission extension unless you want to fiddle with the inner lever.
Does the 1800 ES have a cable or hydraulic release clutch? If it is a hydraulic clutch check the reservoir level. The MC or the slave cylinder may have developed a leak with the result that the slave is no longer releasing the clutch. If it is a cable, the procedure for adjusting is set out in the service manual.
Early vintage M40 / M41 were noted for developing cracks in the clutch release fork which would result in non operation of the clutch. I would have thought that an 1800 ES would have the later improved release fork.
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