SOLVED Spacer was missing. I have a Race Face Vault 424 (rear) with the Freehub HG body. When I installed the axle thru the hub and mildly tightened the axle, I heard a mild click sound. It turned out to be the freehub "Outer Bearing" slipped and moved inward. In fact the outer bearing inward movement compressed itself against the metal inner sleeve (via the inner race). See picture in my PB photo page or link below. Both these are then compressed against the Inner Bearing. The end result is the "outer bearing + sleeve + inner bearing" are now acting as one -which is wrong and creates the problem below.
The bearings move but not independently. Thus the freehub does not slip freely when peddling stops. If I install the axle and not tightened (very loose), the hub body and cassette slip properly when peddling stops. But when the axle is moderately tightened, the hub/cassette does not slip.
If I fix the Outer Bearing position, it will probably slip again. What gives? How do you fix this?
Paired bearings where the inner races make contact with the inner race sleeve is often (if not always) working as intended. The sleeve touching off on the inner races prevents the races from deflecting axially which is critical to radial cartridge bearings being mechanically sound.
If your FHB is locking up when the thru axle is tight, something else might be the cause. I'm not too well versed in Vault hubs, but as an example, Hope hubs use a rigid FHB-hubshell seal that must be "snapped" into position, otherwise, it causes significant drag on the system. The result is something akin to the FHB not being able to coast freely.
Beyond that, have you swapped the FHB--say from XD / Microspline to your current HG? From my quick google of exploded views of the Vault, it looks like they utilize a shim between the inboard FHB bearing and the driveside hubshell bearing. Is the shim still there? Much like the spacer that's located between the two FHB bearings, this shim is critical to maintaining the axial location of all of the components.
As @ageiz has said, according to exploded views and tech docs there should be a spacer washer between the bearing in the hub shell and the inner bearing of freewheel body and if that's not installed binding will occur.
Also I'm not too sure if you've got a plastic seal on the freehub body that needs to be pressed into place on the hub shell, if so you can use some plastic drainage pipe cut down one side to do that and most importantly it won't cause any damage.
As @ageiz has said, according to exploded views and tech docs there should be a spacer washer between the bearing in the hub shell and the inner bearing of freewheel body and if that's not installed binding will occur.
Also I'm not too sure if you've got a plastic seal on the freehub body that needs to be pressed into place on the hub shell, if so you can use some plastic drainage pipe cut down one side to do that and most importantly it won't cause any damage.
Thanks folks! I just swapped freehub bodies, and the wheel wouldn’t spin. Only after taking it apart 2 times did I notice the small silver washer. Tried it under the end cap, but indeed, it needs to go under the freehub body.