Sounds as if a bearing in the overdrive has collapsed - probably either RTC7179 or more likely RTC7171 - or a circlip failure has allowed RTC7171 to move endways so it is not supporting the shaft. The clue is the jumping out of fourth, indicating the back of the gearbox output shaft is not supported. A less likely possibility is that failure of a circlip on the input shaft has allowed the shaft to partly disengage from the gearbox shft, although I don't think it can move far enough. End movement on the quill shaft could also have this effect, again allowed by a circlip failure.
Remove the top cover plate from the T/C and check if it is possible to move the quill shaft with the gear on it sideways at all. In any case, I would remove the overdrive for assessment, and to check the rear gearbox bearing, which is another possibility, although unlikely given the association with engaging and disengaging the overdrive.
John
John
JDNSW
1986 110 County 3.9 diesel
1970 2a 109 2.25 petrol
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