First, fill the clutch resevoir with brake fluid, then try pumping the clutch pedal about 10 times and see if the pedal comes back.
Since the transmission doesn't want to come out of gear, it leads me to believe that the clutch is working fine, but the clutch release isn't.
The clutch release is hydraulic. The clutch pedal pushes on the clutch master cylinder, which pushed brake fluid through a hose/tube, to the slave cylinder, which pushes on the fingers of the clutch pressure plate, which releases the clutch.
Usually when a clutch goees bad, you can put it in gear and it won't move. Not always, but a good percentage of the time.
I suspect that either you have a problem with the clutch master cylinder, slave cylinder or there is a leak in the hose/tube going from the clutch master cylinder to the slave cylinder.
I've haven't seen too many clutches destroyed on the 7.3L diesels. The ones I did see come apart were late 80s trucks, when they had problems with them.
The fact that the pedal is going way down before it feels like it is working, leads me to believe that the problem is hydraulic and not mechanical. Until the fluid is checked and no leaks are confirmed, I wouldn't take anything apart.
And to be honest, if the clutch was the problem, it would be pretty evident to an experienced mechanic.