Greg - A few people have had success freeing up KD cables, but they have used something like PB Blaster, not WD 40. Personally, I feel that if the cable is in a condition where it begins to badly bind, it needs to be replaced.
Our '88 240GL had a bad KD cable and I replaced it using a ScanTech cable from FCP Groton. The cable was perfectly serviceable, and in fact, looked identical to the failed OE cable. It is only $26. The job was tricky, but not impossible. It took about two hours and gave me an excuse to change the transmission filter and do a flush and fill (the tranny pan has to come out).
Normally I'm not a fan of ScanTech, but this purchased worked out just fine.
Good luck.
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'88 244GL, '89 244GL, '90 244DL, '91 244, '92 244
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