Notmoneyguy,
Looks like the drive bail cable has too much slack. Check your idler pulley to make sure it moves through its entire range. I think it's hanging up which is what's causing it not to disengage the auger. Either that or you have a kink or pinch in the cable jacket.
Thanks for the write up. You got an awesome deal on that machine, even though it may have some quality issues. For the use expected, the price is perfectly acceptable. Sounds like that 208cc engine has plenty of oomph.
Thanks aa335, I'll pull the cover at some point and see what is going on with the pulleys, arms and cable. The cable seems fine and kink-less.
As for the engine, "cram a beast in there and they will overlook other flaws" seems to have been the (successful in my case) strategy. AFAIK it is the same 208 cm3 LCT Storm Force engine that Ariens uses on its Sno-Tek two-stage machines, right from the 20, the 24 and up to the 28, unless Ariens specs tweaks for it to improve it to their perhaps higher standards.
This message was modified Jan 16, 2011 by NotMoneyGuy
Ariens Deluxe 28 921022 WI, USA -- Poulan PRO PR621ES 208 cm3 961880002-00