Joined: Jan 2009
Posts: 44,239
Likes: 6,494
From: New York, NY, and High Falls, NY, USA
Bikes: 1962 Rudge Sports, 1971 Raleigh Super Course, 1971 Raleigh Pro Track, 1974 Raleigh International, 1975 Viscount Fixie, 1982 McLean, 1996 Lemond (Ti), 2002 Burley Zydeco tandem
The behavior you describe is not normal. With a healthy hub, if you took the indicator chain out, you would be in 3rd gear.
But if you pull the rod and find the dead spot, it means you went from 3rd gear on the way to 2nd gear.
I can't figure it out.
Maybe it's time for a teardown. Don't be daunted. It's not that hard.