I could be wrong here, but I think that when you are pressing LNAV it is arming the LNAV mode. Anything that shows in white is armed if I remember correctly. What you need to do is to turn the heading bug to intercept the magenta line on the nav display. Once you cross over the Magenta line LNAV should become active. Let me know if this works. Or you could try doing a direct to the way point you wish to go to and LNAV should work.

Thanks.  I think I figured it our between what you said and experimenting. 

Yes, pressing LNAV when still in HDG SEL should arm it as long as you're within the criteria for it to intercept. If you're not then it will say 'not on intercept HDG' on the FMC. If I remember at this point we were very close to the LNAV course so it should intercept without issue. Let me know if I can help any further.