Took the truck in, it is definitely way too thick grease that is causing the problem. The grease is so thick that it acts like a near solid connection and allows the motor to turn the gears under light load, even in free spool. The dealer called Smittybuilt, apparently they started putting in much thicker grease in the 15,000 to 17,500 series industrial winches because many of the guys using the winches on wreckers, flat decks and car haulers were complaining they free spooled too easily and jumbled the nicely wrapped under tension wire rope when kicked into free spool. Pretty clear they have WAY over done the grease viscosity.
The installing dealer is going to pull the gear set off and replace the grease with a Synthetic/moly type grease under warranty and that should solve the problem. We shall see how I like it once they get that done.