Ya we hear a lot of cant get the key out situation, but yours is different.
The factory manual does mention that both interlock & trans cable work together & have to be adjusted properly.
I can't seem to find out how you adjust the trans cable tho. Maybe need a new one?
I wonder is there also a bushing on the 42RLE cable, at transmission, that may be busted?
Or is there a physical limitation in shifter or cables?
If you placed the shifter into Neutral did it start then?
There is some basic instructions on interlock cable adjustments.
Read section 21-page 136 onward..Link:
http://www.colorado4wheel.com/manuals/Jeep/KJ/2005JeepKJServiceManual.pdf
I hope this helps a bit..