This weekend I removed the winch completely from the deuce and sat it on a bench. Drained all fluids, removed the propeller shaft cap, tried to spin the shaft. No difference. Installed it again and removed the entire brake housing assembly, no difference. Removed both the brake housing and input shaft cap, no difference. Pulled the engagement housing completely off and sat the drum shaft in both vertical and horizontal positions, no difference. Removed the drum from the shaft, along with thrust washers and the clutch and repeated the last step, no difference. Decided to open up the gearbox end and remove the worm and bull gears as these were untouched on the re-seal job I did previously. When I removed the end cover I noticed there is spot on the center of the cover, where the sleeve bearing sits, that the bull gear rides on. Seeing as this is a friction point I tried to spin the worm gear with this cover removed. Bingo! It rotated completely by hand. Of course it was unloaded as it was only spinning the shaft not the drum nor any other of the components. So now I have a starting point. I also noticed the drum shaft was protruding about 0.08" further than the cover would allow so it was definitely binding here. I noticed the shaft was not quite sitting where it should. So I pulled the shaft and bull gear. I didn't notice any abnormal wear here. I drive out the worm gear and bearing. Nothing out of the ordinary and the bearings were cleaned out and inspected. They looked brand new. The drum shaft did have some light corrosion on it, when I got the winch there was some water mixed with the oil, so I attributed it to that. I remember the drum going on with a little effort, so I must have somehow moved the shaft into the gearbox slightly more than it should have, which caused some misalignment of the worm to bull gear, along with excessive friction on the end cover. So I put everything back together as per the TM. Replaced all the woodruff keys. Reinstalled the brake assembly and the propeller shaft cover. However I left the gearbox cover off to make sure the shaft didn't move on me again during reassembly. So I spun the worm gear and it still turned by hand. I then resealed the end cover and tried to turn the worm again. It was definitely harder that before this step, but easier than before the tear down. So I checked the shaft. It didn't move. Going back to my trash pile of paper towels and the old seals and gaskets, I noticed the gasket that came off originally during the reseal job was much thicker than the new one. In fact, it had several layers of gaskets laminated together how the TM tells you how to set backlash on the PTO and the propeller shaft winch gaskets. Hmmm. So I mic'd the old gaskets and made a trip to Autozone and picked up some gasket material and cut out a few pieces to equal the old thickness. Checked the end-play on the worm shaft (0.09--within spec) Reinstalled the end cover with the new thicker gaskets...success, no more binding and I could turn the completely assembled winch by hand. Reinstalled on the truck with the propeller shaft and fresh 90w. With the PTO in neutral I could now spin the propeller shaft by hand and turn the winch.
Sure glad I went through all this before I actually used the PTO to drive the winch and pull a load with it. I think some serious damage would have resulted and much more costly than some new seals and gaskets, and time.
Thanks all for the help with this issue. I knew something just wasn't right.