1972 at 125 shifting issues

Hello all again. I got the throttle issue fixed but now i am running into another issue.

 

The bike does not shift. I took the clutch plate side of the engine off because i figured that the plates were stuck from sitting. They were pretty seized on there and i freed them all up. Put everything back together and tried shifting again felt the same thing. It feels like it is doing nothing so i took everything apart again and found in this picture what is moving.  http://imgur.com/bkGIrxm

 

The item i have highlighted just moves back and forth when i shift.. Shouldn't it be hooked up somewhere?  

Has anyone had this issue before?

 

Any help would be appreciated. 

 

P.S. I should also note that the transmission is stuck in a gear i dont know which one but since the chain is not on it still allows me to start it.

 

Thanks

Andy

Edited by andyman54

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