Mine just came today. Yeah, I know it's an old thread, but new info livens them up and keeps clutter to a minimum. If it's still a mystery:
Keep some tension on the cable going out. On the inside of the drum, on the side of the free-ratcheting crank, under the cable (hopefully) is a spring-loaded catch that pops up if the cable doesn't hold it down. If it comes up, it will hang on the rear of the case on extension and stop rotation. Push it down until you pass the lip and it'll be fine until the next time it comes 'round.
My non-ratcheting handle wasn't moving until I tapped on the nub at 12 o'clock above it and it freed right up.
I did snap some pictures if they're needed. Currently, I'm trying to work mine out past a kink in the winch end of the cable that's hanging the extension of the rest of the cable. The kink hangs on the lip of the rear of the case.
They are remarkably nice little hand winches.
Steve