Clutch arm should have no resistance to movement, untill it makes contact with the clutch plates, so yes...free movement.
Keep working in penetrating oil (not water displacing or lubricant such as WD40!!). Good penetrating oil. It will take a lot of work to get this down. When it is, and arm is free, then use some fine lubricating oil, such as 3in1 and work that in.
When that is in, then Lithium grease from a spray can. When sprayed it contains a lot of solvent, which will help work it in, but after a few seconds this evapourates, so clean it up and repeat.
It will be hard work but it is essential.
If you do not complete this, and re-assemble when arm is tight, be prepared to have to free it off every week, otherwise it will seize up again. If it stays tight, then excessive force is on the thrust bearing constantly, and the thrust bearing will melt!
Ask me how I know this