Hi Mike,
The forward and reverse is controlled by the small lever on the top of the switch. The switch will need to be replaced to make the repair. You will need to desolder the old switch and then solder the new one in. The new switch is part #650564-0. If you have never soldered before it really is not too difficult. Stop by your local Radio Shack store and they can set you up with everything you need. You will need a small, pencil type, soldering iron, some solder and flux and I would pick up some braided desoldering cord. The desoldering cord is a braided copper tape that will pull the old solder out of the connections on the switch.
To make the repair, open up the tool and position the switch so that the wire connections are easily accessible. Make a note of the location of all of the wires on the switch. Now take the desoldering braid and hold it against one of the connections. Apply the heated soldering iron to the braid. The iron will heat the connection through the braid and when the solder becomes warm enough it will wick into the braid. Continue this procedure on all of the connections until the old switch is free. Now wire the new switch in place. Attach all of the wires to the correct posts on the new switch. Now apply a small amount of the flux to one of the connections. The flux cleans the connection and allows the molten solder to flow easily. Heat the wire and post with the soldering iron and then touch the new solder to the post. When the post and wire heat to the correct temperature the solder will flow into the connection. Repeat this procedure for the rest of the connections. Reassemble the switch into the housings and close everything up. Your impact driver should be good as new again!
Good luck with your repair!
-Mark