I have a sales order that the customer ordered 7 of a specific item, a workorder was created , but they only built 5 out of the 7, which the remaining 2 are now on back order, the item does have a qty of 40 available now but I am not able to get the last 2 to allocate to the sales order due to the workorder,

This is unfortunately the way special work orders work. Once you have a linked WO you can't allocate inventory from any other source

Thanks, that is what I determined based on SuiteAnswers and other sources, but I wanted to confirm with the experts here before I moved forward.