The headset is stuck or is the stem stuck? Did you knock the wedge at the bottom loose?
Put the long bolt back through the stem and thread it into the wedge at the bottom. leave your allen in and give it a tap with a hammer to loosen it. Judging from the looks of the bike it is possible that the stem is corroded and stuck in there. do a search on stuck stem to find tips on getting one out.
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“One morning you wake up, the girl is gone, the bikes are gone, all that's left behind is a pair of old tires and a tube of tubular glue, all squeezed out"
Sugar "Kane" Kowalczyk