Fitz - I did some more research on that engine and the 2-speed drive system. According to what I was able to see, the 2 speed gearbox used 2 propellers with different pitches instead of changing gears. The low pitch prop started out with the high pitch freewheeling - then the high pitch counter-rotating prop engaged for high speed. According to what I found, Merc tested it a Lake X and it supposedly ran well. It was, as you said, VERY expensive - to much to produce - even for the racing guys! Only one was made.
You may remember the Land n' Sea shifter prop that changed pitch as prop speed went up. That was a cool idea that never got popular after Land 'n Sea's factory burned down. I ran the Mercury version of this for a while but could never get it quite tuned right - and shells would sometime get stuck and it would stay either low or high until you cleared the prop out.
For fun,
check out this old video of the Torque-Shift prop I found on utube:
https://www.youtube.com/watch?v=C5niXCY-ikM
