I've never seen a freewheel lock ring loosen on its own, but I reckon it could happen. It's likely that it was inadequately tightened during manufacture and loosened up during riding causing some loss of bearing balls. That would explain the play you are observing. I know you think you still have all the bearing balls; however be aware that there is a second ring of balls on the inboard side of the freewheel body. That lock ring is not an adjustment for play it is supposed to be tightened down fully. The adjustment is done with thin spacers under the ring. Freewheels typically do have some play but it should not be excessive.
I would handle this by completely disassembling the thing and assure that both inner and outer races had enough bearing balls. I'm guessing that this will resolve your excessive play. If you don't have the time, skill, or patience (most important) to do this, I'd recommend replacement.
Good luck - let us know how it works out.