It sounds to me, if I'm reading your description correctly, that the mechanism you are describing holds the keel in position and is not related to the lifting or lowering mechanism.
My concern would be the sloppiness in the keel. Is it moving about when fully lowered or only in the partially retracted position? I'm thinking that something is worn in either the keel trunk (perhaps missing bushings) or on the centerboard itself. If so, that wear is going to promote more wear, potentially in more serious places. I'd investigate that fairly soon.
There are two schools of thought on locking pivoting or drop keels/centerboards. The first holds that it should always be locked in the event of a knockdown or rollover. Aside from the loss of righting moment (stability) there is the potential for hull and keel trunk damage, perhaps quite severe. The second school of thought advocates keeping the keel unsecured so as to ride up in the event of a grounding.
There is some logic to the second school of thought in that it may not result in quite as hard a grounding but the keel will most likely have to be further retracted to unground the boat in any event. Much depends on the force of the grounding. Unsecured may lead to damage to the keel and it's mountings as well by it's being potentially torqued in a hard grounding. In a softer grounding, one may be able to just raise it a bit and sail or motor off.
I suspect that there are many, if not most, keels wandering about out there unsecured. It really depends on the sailing conditions encountered, I suppose. I would though, take the sloppiness seriously until there is evidence that it is "normal". I suspect that it is not.
The problem with designing a locking mechanism that can intentionally fail, as in a grounding, is in constructing it so that it still offers the strength to hold the keel in a potentially violent rollover. I have what is called a swing keel of some 400lbs (181kg) and I leave it unlocked for gunkholing (puttering about in shallow water) but lock it when sailing in deeper waters. I've a steel pin that secures it and have thought many of the same thoughts that you no doubt have. I'd rather have it shear than bend in a hard grounding, while still supporting the keel in more traumatic circumstances. So, I've ruled out a softer pin of brass or aluminum as they'd offer me the worst of both world's-a jammed locking pin. And I've not seen anything else, in a 1/2" diameter, that I'm sure I'd trust in a rollover. I've thought that some two hundred year old oak from an old farm-house, the kind you can no longer pound a nail into, might be the ticket but that has not gone past the speculation stage. (g)
If you can post some photos I'm sure that others might have some good information to offer.
“Scientists are people who build the Brooklyn Bridge and then buy it.”
Wm. F. Buckley, Jr.