I looked around online, and found a few different solutions to the problem. One involved tapping the key with a hammer to get it to work, another involved drilling out the old cylinder to install a new one.
The biggest problem I found was that each solution was either temporary, expensive, or involved getting a new key. This means that you would end up with one key for the doors, and a different one for the ignition - not the solution I wanted.
This instructable will show you how I solved the problem. I ended up with a new ignition lock cylinder, but continue to use the original, programmed key. The total cost of the repair was the price of the part - $72.99 with tax. The whole job took me about 4 hours, but I had to figure out how a lock works without much help. If I were to do it again, it would probably only take 2 hours.
The repair involves changing the ignition lock cylinder for a new one, and reprogramming the computer to accept the new keys. Ford has a passive anti-theft system (PATS) where each key has a chip, and they have to be programmed in. No problem if you've got two functional keys, because you can add new ones, but you have to be able to turn the key in the ignition to do so.
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Signing UpStep 1Stuff you're gonna need
Tools:
10mm wrench
#2 Philips head screwdriver
T20 Torx screwdriver
8mm socket and driver
small screwdriver (I used a small torx screwdriver)
utility knife
putty knife
small flathead screwdriver
small paper-clip
clamp or vise
vise-grips
needle-nose pliers
clean, light-coloured work surface
Optional:
magnifying glass
ratchet
snap-ring pliers (might make the job easier, but I did it without them)
power drill and grinding bit
Materials:
replacement lock cylinder (comes with 2 chipped keys)
grease
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There's a special tool to fit the cap but all it does is peen over the edges nice and neatly. If you take care on a clean surface you can do a nice job with the end of a screwdriver.
I haven't checked [hey, I sell the Ford stuff!] but I bet there's a more reasonably priced aftermarket option.
I ended up with two sets of keys - one for the doors (that were programmed to start the ignition, but wouldn't turn the key), and one for the ignition (that would turn the lock, but not start the car because the chip wasn't programmed)! If you have 2 working keys, you can add more by inserting one functional key, turning it to ON for one second, removing it and putting in the second functional key, turning it to ON for one second, then removing it and putting in the new key, turning it to ON for one second. (If that's not a good explanation, search for "Program a PATS key").
To program the new keys, I removed the ignition switch from the opposite side of the column, and used a screwdriver to turn the ignition with the various keys in the lock. Worked like a charm!
Okay, so I'm left with two different keys for one car, but I fixed it myself and it was much cheaper than getting the dealer to do it.