The spark advance lever advances the armature plate, which the ignition components are mounted to. There is grease under the armature plate to help smooth the movement of the lever. I've not heard of one completely frozen, but I've had them stiffen up when the grease gets old and gummy. It could also be corroded if it was exposed to lots of moisture or took a swim.
I would recommend popping the flywheel and removing the armature plate to see what you are dealing with. It may just need to be cleaned up and freshly (but lightly) greased where the plate sits on top of the crank case.