Words of encouragement winging across the Atlantic to help your machine's homeland.
You're absolutely spot on and worked it out for yourself the brake on reel 3 has not only
not lifted but is jammed in place because its foot has travelled beneath instead of above the lever that resets it.
How or why is another issue.
I've never seen it happen before.
First of all we need to free it, and the easiest way is to reverse the cycle and let the mech run backwards so the reset lever reverses back from on top of the brake's foot.
With the mech out and facing you you need to locate the ratchet that is holding it all at that point in its cycle. When you play your machine (slowly) you can hear a steady click, click, click as you pull the handle ........ that's the little bugger! Now you have to locate it and release it so everything can run backwards to release the jam.
This ratchet is located on the right hand side towards the back between the handle and the anvil trip and is partly hidden by the large vertical spring.

Here is what you'll see because the ratchet is in operation and holding the mech against the teeth that stop it from going backwards.

First get a very thin screwdriver.
Then put some weight onto the lug which connects to the handle when it's in the case. This will take the pressure of the ratchet, using the screwdriver, lift the bottom of the ratchet clockwise up and out of the teeth holding it there.
Holding the ratchet away from the teeth with the screwdriver you can now release the pressure off the lug which connects to the handle when it's in the case, and the mech will return backwards to its starting point.
If it doesn't run backwards then the foot of the brake must be well jammed under the resetting lever so you'll need to use your third hand to pull the brake foot free.
This what the ratchet will look like when everything is back at rest.

Now that you've returned the universe back to the point of creation and the Big Bang, and you know how do this repeatedly, I suggest you now put whatever weird coinage you Americanererers use instead of pounds, shillings and pennies in it and gently pull the handle whilst watching what the deuce is occurring with that last brake.
It might have been a one off.
You might have had a stray coin in there that deflected the brake in the first place
It might have been the flux of The Earth reacting against a discombobbulating surge of Gooey stuff from the planet Brugggh.
If you have further problems please don't hesitate to buy me a Business Class return ticket so I can pop over, fix it for you and eat plate-loads of Sarsaparilla.
Best of luck
Let us know how you get on.
Badpenny
Lincoln England just down the road from where the Pilgrim Fathers left from on The Mayflower.
ps - Why do you drive on the wrong side of the road?