I have a 2005 997 C4S tiptronic and I'm unable to pull the key out. It states that "shift lever not in P position", however the shifter is in P and it shows "P" in the gauge cluster too.

Any insight as to whats wrong?

You should move this to the 996 or 997 forums where members owning tiptronic cars may me more helpful.

Edit: I see that someone moved this from the 991 forum. Great!

IIRC you should use a pin pushed through a pinhole on the periphery of your ignition switch to release the key. The underlying issue maybe tiptronic related or not, as it could be a bad ignition switch (similar to the procedure described below):

An update to this. I have found that when I wriggle the tiptronic shift lever when the key is stuck, sometimes the ignition lock will "click" and the key will be released. Could there be an issue with the tiptronic shift lever itself? Is this a common issue?

Doubt you'll hear from him - his post is 3 years old and he hasn't posted in 2.5 years. If you're having the same issue, why not create your own post?