Trying to re insert the lower unit on my 02 200 mercury and the shift rod won�t line up with the sleeve I think I got the main shaft in position by turning the fly wheel by hand. I�m trying to find out if I need to shift the console into forward and then the same with the lower unit so it would line up into the sleeve?

put the shifter in forward an make sure the lower unit is in forward when you slide it up watch to make sure the splines on the shift shaft line up as you rotate the prop to align the upper drive shaft with the splines on the bottom of the crank.

I had the same problem with my Yamaha. I ended up having to have someone move the gearshift back and forth while pushing the lower unit on. Once it aligned, it slid in no problem. The previous time, I had no issue. I must have accidentally moved the shifter to the wrong location or something.

I did the same thing by myself this summer.
Did it like SS said. It really helps to be able rock the prop and get the splines to align . Hard to do that in neutral.
Oh, and hold your mouth right.

Wait until you get ahold of one of the 40 to 60 hp Mercury`s that if you move the main shaft the shift shaft jumps plum past reverse. Trying to hold everything all at the same time is fun. I built a support stand for holding the lower while changing the water pump and it allows you to rest the lower on it using the trim during re-installation.