Welcome from another 56 owner (although mine is a lowly Pathfinder ).

The guys are right, finding those housing without pits is all but impossible, and replating will be expensive. You should be able to resurrect functioning though, a little sanding with emory cloth wrapped around a pencil, spray some Corrosion Block in there, check the wire connections, hopefully that will do it.

Last car I had with OD was a 56 Mercury, that was in the early 60's, the knob is to lock it out or let it work, if you lock it out it will drive just like any 3-speed stick shift, if you let it work the OD will not engage in 1st or 2nd gear, and will only engage over 30 mph in 3rd gear, all you have to do once you get up to cruising speed is let off on the gas and it will engage, then use a light foot to keep it in OD. Stomp on the throttle and it will disengage, sort of like a 'passing gear'. No need for clutch to engage or disengage OD in 3rd gear. At least that what my memory tells me is how my OD used to work.

Dave