Yeah, they're crap. My fiance has an '05 Cobalt, did the same thing. It was completely stuck. You could get the key in and out of the cylinder, but it wouldn't turn, and the gearshift was stuck in Park. Eventually, I pulled the center console apart, and was able to get the catch lever off the shifter momemtarilly to get it in neutral so I could at least move it.
It's been more than a year since I had to do the operation on the thing, but if I recall, the lever inside the steering column is white, and was a PITA to get to, but you can get to it with a screwdriver I think. The thing has some kind of "time out" on it... ever since I got it past the step you're trying now, it's been "fine", except the key has a hard time going in or coming out. Sometimes you can't get the key out until you wait several seconds for the time-out, and if it's quiet, you can actually hear a 'click', and bingo, the key is free.
Another scary thing is that now you can start the car with just about any key! (luckily the door locks are still right!)
Sorry it's been too long to recall exactly what I did to be of much help... from what I understand, it's a common problem on a lot of late model GM's, not just the Cobalt.
Good luck,