Rule 3, both Inland and International paragraph C. under general definitions.
"The term "sailing vessel" means any vessel under sail provided that propelling machinery, if fitted, is not being used; "
"is not being used" does not say anything about propelling machinery being used for propulsion.
The rules do not require a sailor who sees an engine exhaust and/or hears an engine on another sailboat to know if the other sailboat is in gear or not. That is not the intent of the rules to make us mind readers or require up to have Xray vision to see into the cockpit of a crossing sailboat to see what position his shift lever is in.
If propelling machinery is being used (for any reason) you are no longer a sailing vessel. If you are no longer a sailing vessel, by default you are a power vessel.
I for one, can tell you with absolute certainty after being run down by a power boat and going through the court possess with 2 Admiralty lawyers at my side. Sail up engine off = sailboat. Sails up engine on = power boat. Gear selection does not mater.
One of things being overlooked in this discussion is what are you conveying to the other boaters with a engine on. You are conveying you are under power thus making you a power boat.