I was thinking more of,,, is there lots of metal (indicating a major failure) ?
Or no metal (indicating something more minor).
I'd hate for him to change an engine and then find out later that there was only a minor problem.
If there is no metal, I'd go a bit deeper before moving to the next stage.
I'm like you don't think the gear is stripped. I suspect dogs on 4th gear damaged, 4th gear shift fork bent, or the drum itself has a problem.
I'm interested in this problem as I've only worked on Dirt bike and small bike tranny's.
On those, worn/rounded gear dogs or a bent shift fork will make it kick in and out of gear. The bike makes a terrable noise, but actual damage is minor.
Ride safe, Ted