Thanks for the input everyone.
The freewheel assembly came off fairly easy when I spun it against the whole wheel (no chain whip). I guess I was interpreting the assembly differently than it actually works.
In any case, I got it cleaned a bit.
The bad part is the hub is toast. The races are pitted and grooved in the cones and at that point I don't trust the assembly going back together. As to how things got pitted - that I don't know. I am thinking perhaps that it was installed incorrectly with too much tension on the cones and the riders weight, plus road bumps, exacerbated it. But those races should be pretty darn hard.
The wheel was apparently replaced a few years ago, it wasn't the original wheel. The freewheel + gear assembly is original (and from what I can tell is still in pretty good shape - just a tad bit of slop in it, but nothing that stands out as being a problem yet).
Looks like I am going to be rebuilding a wheel next if I can find a decent hub.