Thanks for the replies.
"After you install the freewheel, and then the first gear, the gear should spin free when rotated clockwise. Does it?"
Yes indeed. It's funny, because a manual I checked out has kind of contradictory instructions, but I think it was just a poor choice of words on the copywriter's part.
"The manual states to first install the freewheel, then use the tool to hold the springs.......don't know if that makes a difference"
I was dubious of this, but I re-installed it regardless to make sure. Seems to be no difference.
"Make sure its not the wheel instead of the motor causing lock up."
It's definitely not the wheel itself. Reasonable question though.
So what is happening is...when I fasten the clutch housing or whatever it's called (it's in my left hand in the top pic), it prevents the clutch bell from turning; this is not because the inner rubber it being pressed against, but the brim of the bell is being pressed. I see it happening, but I can't wrap my head around it. What the heck is going on?