I had a similar problem on my 1940 RTS. I pulled the transmission cover and discovered that the shift rails were shot, very heavily rusted. I think the culprit was years and years of sitting in the Canadian elements without a gear shift boot.
I installed a set of really nice used shift rails and it shifts like a new one now. Taking the cover off was a good idea anyway, as the tranny needed alot of flushing and cleaning to get the old sludge out.