I'd say it's 90% likelihood to be your shift knuckle. Just redid mine, if you're a true DIYer you can take the old one and refab a new one. otherwise, they're for sale for about 35 dollars or so, i believe. check out this thread http://forums.nasioc.com/forums/show....php?t=1564285
Here's a great writeup i followed for my own '98 legacy:
"You will need:
1.) ramps, or ability to lift vehicle enough to work under. (I simply used drive on ramps it was enough room, tight, but enough.)
2.) 12mm socket, flex extension, at least 8" extension, wratchet, 12mm wrench, set of pin-punches (I have a set of 6 and none of them were exactly correct, but I made them work.)
3.) PB blaster to make life easier.
4a.) Needle nose plyers - longer the better
5.) Parts.. $62.00 including tax for new knuckle with bushings included. (For the shift lever itself, $7.00 bought me the new spring for under the car, and the 2 new blue bushings for the sides of the shifter inside the car.)
6.) ball joint puller, or similar item to tap the knuckle off the shift linkage in the trans.
7.) Grease.. I use some synthetic grease for all my projects. makes things easier to put together, and avoids squeaks.
1.) Having a helper is cool... shift tranny into 5'th gear.
2.) Go under car once properly secured and supported.. oviously. Position yourself to the left of the exhaust.. if you are standing under the vehicle on a lift, or laying on the ground you'll need to be under the drivers seat basically.
2a.) Remove spring from bottom of knuckle with needle nose plyers.. if it;'s even still there.. mine was gone.
3.) Using pin punches and hammer, remove center spring pin (hammer upwards until it falls out, relatively easy.)
4.) Remove larger spring pin, same deal.. hammer it out with a punch.)
5.) Shift into reverse to make this step easier. Using your 12mm socket gear, make an extension and swivel head to fit onto the bottom bolt of the rear of the knuckle. (Here comes the hard part.) Using a 12mm wrench, hold the top nut still so it doesn't turn as you use your other hand to turn the socket below and remove the nut from top, and stud bolt from below. This may be rusted in place so you will need to have a good long set of channel lock pliers or something to drag it, and pull it down and out.
6.) This step is up to you, but I found it easy to use a ball-joint puller bar, and place it over the transmission shift linkage in front of the knuckle which is undoubtedly stuck on there from corrosion. Hammer the back side of it, so the knuckle slides off, and presto.. knuckle is out. (granted up to this point, it took me 2 hours since I had little space to work and no room to swing my hammer.)
7.) Clean the old stud bolt and nut off (emory paper, or a wire wheel works great for removing rust.)
8.) Grease up your new knuckle which is pre-bushed.. reach up there and slide it back into the shaft from the trans. Have a helper if possible maneuver the shift lever so you can slide it over the new knuckle, apply grease to your stud bolt and slide it back up through the fork. Apply top nut, and tighten (don't know torque specs.)
9.) Have helper then push shift lever forwards or side to side until you line up the holes for the front side of the knuckle, and the hole in the shaft from the trans. (this is hard, the brace for the trans is right in your way.) re-tap in your large spring pin using your punch. Next insert the smaller center spring pin and tap that into place. This may be trial and error.. I found it easiest to place my punch inside a socket that fit, then ad an extension and hammer it into place.
10.) Once you have gotten this far, you're pretty much done. If you purchased 2 new bushings for inside the car, simply remove the 2 phillips screws under the console lid, pull up the plactic trim for the e-brake.. then unscrew the shift knob.. pull up the plastic surround and I believe 12mm wrench to remove the nut and bolt from the shift lever/fork assembly. Remove old bushings, grease, apply new bushings and re-tighten the botl and nut up there.
That's about it.. Sounds simple but my best advice to you is be patient, be careful... and the higher the car is the easier it will be to work on. With a lift this job may take you 20 mins. It took me 4 hours, with less than 2 feet to work with under the car laying on the ground.
You may wanna buy some gojo also, your entire arms and face WILL be covered in soot unless your car doesn't leak as much oil as mine or have 194,000 miles on it. HAH!
Alright hope this helps! Sorry I don't have pics.. couldn't get a camera. Sorry for any bad grammar.. this was typed quickly and with out spell checking it.
Yes- replacing the knuckle is a cure all, the shifter with new knuckle and spring feels 98% like new. the other 2% would be the bushings on the shift lever inside the car, and the maybe half a % would be new shift assembly where the ball of the lever sits in.. that does wear out which provides up and down motion, but most people will never feel that when shifting.
My shifter feels new, and sits perfectly centered. After this job, I thought 1'st gear was in the wrong place, my first used to be on my leg, and 5'th was punching the passenger in the leg.. lol. Now it's so close I almost felt like I upgraded to a short throw / close gate. haha"