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It sounds like something broke inside the transmission. It could be the shifter cable, but usually the car will move in forward or reverse, just not according to the shift indicator if the cable is at fault.
Been there done that, I have same problem ,its the transmission, Why if it was the transfer case,look at the design it couple the drive shaft ,there a gear and chain attatched by a gear drives the front drive differential,You have a transmission failure
No. An emergency brake on the 86 camaro engages the pads against the rotor and the vehicle would not move either in reverse or forward. It sounds like you have a gear problem in the transmission that could be related to either solenoid or actual gear wear. Assuming the vehicle is being MOVED as you say while the engine is running.. thus providing the energy to move it.. Going in reverse has the solenoid engaged one way, drive the other way. Solenoid sounds damaged at this point. Unfortunately this probably will require a transmission rebuild.
Check your fluid level to make sure its up to the specified level, then I'd be checking out your linkage from your shifter inside the car right to the transmission, it sounds like to me your linkage may be worn enough to put the vehicle in drive but not reverse. The linkage bushings are a common problem on vdubs. See if you can put the car in reverse by moving the linkage arm directly attached to the transmission (make sure you have someone in the car with the brakes on or caulk the wheels) if it does go into reverse when you manually move the direct linkage arm at the transmission then replace your linkage bushings, if not then the only other problem would be a transmission internal problem. Good luck
Sounds like the transmission.. If the axel was broke most likely it would still go into gear quite easy.. Bad axel would cause bad shimmy in front end.. Suggestion would be to take to a transmission shop and have checked out..