You mentioned that you are new to motorcycles, but... If you've managed to take the front cover off, attach a 17 mm wrench and socket, and can see the crank rotating through the timing cover - then you've done great !!
You mentioned that this is a 1978 model, with low miles. These all had a recall due to the "
Cam Chain" tensioner. Dealers resolved this as part of a recall. When they completed it, they punched 3 marks next to the Engine Serial Number (found on the left hand side of the engine):
View attachment 205682
The fact that you can rotate the crank a small amount would seem to indicate it is not truly "seized", if it is in neutral. It's not the "
Gearbox" - if you can select 1st or second gear easily, which also rules out the
"Clutch"..
A suggestion was made above to remove the cylinder head valve covers, this might be really helpful. If you do that on both sides, it exposes the "
Inlet valves" (at the back of the engine, near the battery & air filter), and the "
Exhaust valves" (to the front, close to the muffler down pipes). The valves are part of the
4 stroke cycle (suck - squeeze - bang - push) and are opened and closed as part of that, allowing fuel/air in and exhaust out.
They are controlled by the "
Rocker arms", which are moved by the "
Push-rods" - these are close the frame. They are moved by the "
Camshaft" inside the bowels of the engine.
What you could be happening is as a result of a "Mechanical failure" of the Push-rods, a "dropped" or stuck valve hitting a "
Piston". Worse still - it could be part of the internal moving parts connected between the "
Crankshaft" and the "Camshaft" that moves the "Push-rods"., i.e. a damaged "Cam Chain" due to the tensioner as mentioned above.
If all appears to be OK, try removing the "
Spark plugs", and use a small long wooden dowel. Rotate the crank again (slowly) and ensure the dowels move up and down. If they don't you might think they are seized - they could be. But it's also possible that the "Connecting rod" ("
Conrod") between the crankshaft and the piston has broken.
If you end up having to do a rebuild, you will hear a lot on the CX 500 forums, click on the link to learn about the "
Triple Bypass" (for the the "Cam chain" and tensioner/guide blades, the "
Stator" and the "Camshaft" mechanical seal)..
There's a lot of help available in this forum, and everybody here will give you great advice. Good luck with your diagnosis and fixing it !!