How did you go with the penetrating oil? It's essential here, to maintain what movement is still there.
Getting a good penetrating lubricant in there is an essential part of the process. Penetrene is excellent; Inox and CRC 5-56 are also good. WD-40 isn't, for this job.
What has happened is that the shaft has nearly become 'rust-bound' in the sleeve. Water has got in between the two at some point, and formed rust. The engineer's 'rule of thumb', is that iron rust occupies about seven times the volume of the metal it was formed from. So the rust has taken up the clearance between the shaft and sleeve.
So what has to be done, is to break up the rust by moving the shaft - Mark's suggestion of drifting the shaft back and forth is a good one, in addition to rotating it. The penetrant assists this process considerably.
Then the freed rust particles have to be flushed out of the shaft/sleeve space. It may be necessary to drill a small hole, ~2.5mm, in the top of the outer part of the sleeve, to aid this.
As it's not desirable to drill into the shaft very much, you'll have to use a 'pecking' technique once the drill bites, so you don't go in too far. Use a centre punch dimple to get the drill started.
The hole can be sealed off afterwards with a small piece of sheet rubber or gasket cork , secured with a hose clamp, so it doesn't channel more water in.
