yes. it would also cause noises in every gear but 4th gear.
in this picture
you can see the input shaft on the left with the input gear to the cross shaft. the first gear on the output shaft (which connects to the input shaft) is 4th gear. when that is engaged, it slides a collar between the input and 4th gear, locking them together for a 1:1 ratio.
the next gear is 3rd gear. it is run off the cross shaft...a collar slides and locks the the gear to the output shaft, thus connecting the cross shaft to the output shaft on 3rd gear
2nd gear is next in line, and functions identically to 3rd gear.
1st gear is next in line and closest to the midplate and bearing. it works just the same as 2nd and 3rd. matter of fact, I believe the syncros are interchangable between the 3 of them.
5th gear is an add-on on the other side of the midplate. an ax4 4 speed is the same as an ax5 5 speed except that instead of 5th gear, it has a mini balancer on it, and the slide rails are slightly different.
reverse works by simply connecting the input shaft through the cross shaft and hooking the cross shaft to the reverse gear on the output shaft...which is why the reverse has an idler gear instead of a syncro and shift collar.
so, I think your problem is that your bearing went out for the cross shaft on your midplate, which is why 1st gear no longer functions..it's running crooked. this would cause noises in all other gears except 4th gear.
the other problem you could have, which is one that I've had, is that your input gear has sheared off from the input shaft and cross shaft. that would look like this: (it is the first gear on the right, directly behind the input bearing.)
it'd be easiest to install a replacement, but you can build it yourself for less than $100 if you only replace what is bad and ensure that the syncros are all good.
a VERY important thing to remember while you're working on this...there are ALOT of detents and springs in that midplate and on the slide rails. if you don't HAVE to take the rails out, don't. the only rail I ever removed when rebuilding three of these cases was the 5th gear rail...you can take it apart yourself if you're gentle without ever removing any other rails (though you may have to turn several of them)
that is some really great info and pics! thank you so much for the help! i really appreciate it!!! where is a good place to get a replacement at?