First thing is that if you used the red 3 in 1 oil don't again. That's the veg based one. The black 3in1 oil is actual petroleum based. The red will oxidize and gum up. It's also a lousy penetrating lube. PB Blaster, Kroil or ATF are far better penetrating agents.


The end of the indicator rod threads into a small piece of steel that sits in a slot running crosswise to the axle. It is very possible that this piece or the rod have rusted in place. Does the rest of the bike/wheel show corrosion? If so that's a good sign of bad things. About the best way to kill an AW hub is to not keep it fed with a light weight oil. Oh and leave it outside in the rain a lot.


I suggest that you find an on line exploded diagram of this hub to better understand the internals. In the worst case taking the hub apart and breaking free the frozen parts then replacing what is either worn or corroded is the likely path. There are a number of very thin springs that act on the pawls and the indicator key/rod. These are effected by rust sooner then the other larger bits.


If you were here in Rochester I'd offer to look at it. Since you haven't offered your location no one can suggest a LBS to help you. Sheldon Brown's website has a lot of helpful info and might be a good source for parts if your LBS is internal hub phobic. Andy.