I just finished repairing my 98 Outback with a simmilar problem. Here's what I learned.
With the key ON, pushing the brake pedal down activates a solenoid which releases the shift lock below the shift lever. Subaru was thoughtful enough to know this can fail and leave you stuck in a parking lot or worse. Open the stash box between the seats and remove the two screws that hold the Parking Brake cover and pull it back. The shift lever cover is clipped down, pull or pry it completely off. There is a hole in the gear indicator cover where you can stick your screwdriver to release the shift lock so you can drive home or wherever you want to work on your car.
Note that this is not a "reset button". When you put it back in Park the shift lock will lock again.
To access the shift lock and solenoid (if you put the covers back, take them off again) remove two screws and the shift handle. Remove four screws and the gear indicator cover (twist to remove light bulb). You will see the shift lock and solenoid.
In my case, the previous owner smoked and spilled a lot of coffee, and the shift lock was gummed up with ash and sweetener. I cleaned it with WD40, let it dry and lubed it with LPS2.
You can test the solenoid. It has about 10 inches of wire ending in a plug. Unplug the plug. Using a 9V battery and a couple of wires you can try to activate the solenoid. If it doesn't work, reverse the wires. If it still doesn't work you need a new solenoid. Two 10mm nuts hold it down, bend the wire retainers out of your way.
If your solenoid is good and the shift lock moves freely, I would suspect the switch under the brake pedal. However, I didn't have to go that far. Hope that helps.
Sunday, August 12th, 2007 AT 2:36 PM