Hmm. Well they seemed pretty well greased, but I guess if that grease was oxidized then maybe it didn't lubricate very well.

I basically ended up with the lock nut in the same position (same preload?) as they were originally. What I did was tighten the nut down hard with a crescent wrench, then loosen, and hand tighten it snug. I could move the washer with a screwdriver, but not my fingers. I couldn't tell a difference in how freely the hub spun with the nut tightened this way vs. loose, so I assumed that it wasn't too tight.