Yes the flywheel turns freely both directions and wheels respond correctly thru a cycle.
I just did another test and found something I didn't see before. When I give the locomotive power, the rear roller gets VERY hot. This is only from about 5 seconds of power, then it trips the breaker.
Edit: can't find a cause for the hot roller. Appreciate all you guys' help. Its given me alot of insight into model train maintenance and I'll be able to easier explain to my model train shop the issues. I'll let you know what happens Sarurday once they repair it.