OK, just to close out the thread:
I took apart both drive gear assemblies (the ones that sit inside the wheels and drive them). The years had turned the factory grease to wax; the springs were not strong enough to push the key into the pinions. I scraped the wax out and cleaned them up with kerosene. Once they were completely clean I greased them with Stens 00 grease and reassembled. There doesn't seem to be a way to grease these assemblies other than to take them apart. I used a drill on the pully shaft (9/16" socket) to test the mechanisms, they seemed fine.
So it turned out this NOS S21ZSN had three different problems develop over the years of sitting at the dealership:
a) There was something in the drive cable at the handle end that stopped the cable return spring from disengaging the drive. I believe it was bug parts (blech!). With the help of silicon bicycle cable spray, I got little black pieces out of the top of the cable once I removed the bottom end so the cable could move its full stroke. Once the cable was cleaned up, it worked fine. Full, normal (i.e., when assembled) stroke of the actuating arm on a new S21ZSN is about 5/8".
b) The grease inside the drive transmission had turned to wax, making the transmission prone to not disengage when the handle is released. Even when the fork-shift was disengaged (by pulling the arm clockwise, toward the rear of the mower), the drive/driven plates kept gripping the driveshaft. Once released, they did not want to grip the driveshaft unless a lot of counter-clockwise force was applied to the arm - more than the spring-loaded arms could apply.
c) The grease inside the drive pinion assemblies had turned to wax (see above).
I tried the mower out Thursday and Saturday (about 3 hours) and am please to report the mower drives VERY well and has tons of power. Just like a new one, heh he. I am glad that I stuck with it and didn't remove the drive apparatus. It was worth the pain to get it working right.
Thanks again to all of you for your advice, especially Unclelee.