There is some interal linkage that moves a shift fork. The shift fork moves another gear back and forth to engage/disengage the two PTO shafts. Sounds like and internal linkage or shift fork issue.... something has come unhooked inside the transaxle. Your best bet is to get your hands on the Tech Manual... it goes into great detail on how to disassemble/reassemble the transaxle.
First thing to check is the roll pin that holds the PTO external shift arm on the shaft. Move the shift arm back and forth while looking in the end of the arm at the PTO shift shaft itself and make sure the shift shaft is actually moving with the external shift arm. If it doesn't, then the roll pin has sheared... drive out the pieces and replace the pin. If the shaft does turn with the arm, then it's an internal problem and you'll have to pull the transmission and the transaxle out so you can open up the transaxle to get at the problem and fix it.