Hey folks, I found this forum because I have an HS-70 with the exact same problem as the original poster… first and second gear were inoperable while 3rd and reverse worked just fine.
As it turned out my problem was slop in the shift lever. If you look at the post by underdog of the shifter schematic you will see a compression washer (#18 in the schematic) between the shift lever and the stud on which it mounts to.
You can’t simply tighten the nut (#16) because it will just bottom out on the shoulder of the stud. I ended up installing a regular washer that fit over the shoulder of the stud and then installed the compression washer after that, so when the nut was tightend it simply added more compression to the compression washer and removed the slop but did not make it a ridged assembly.
In my first attempt to fix it I adjusted the cable which disengages the friction disk from the drive plate. This sort of worked, but if I adjusted it so the drive plate lifted high enough to release then the cable was to tight to allow the drive plate to press firmly against the friction disk once it was in gear… all I was doing was compensating for the slop in the shifter handle.
With the slop in the shifter handle removed the drive plate lifts about 1/8 inch off the friction disk, and when it’s in gear, the cable has no tension on it, so I know it’s not being held off the friction disk.
As to why it only affects 1st and second gear and not 3rd and reverse, the only reason I can see is because the drive plate on mine has groves worn into the drive plate where 1st and second gear are located, since they are the gears which I use the most. They are not very deep but I can feel them when I run my finger along the drive plate, I would guess they are 10-15 thousands of an inch deep, which doesn’t sound like much but it was enough to cause the problem.
I hope this helps, and thanks to everyone else who posted, you gave me a good understanding of how the whole system works.
Mike