Dingo76,
You said,
With drive belt removed the motor spins freely every time with no problem.
Now is this turning by hand or with power? If working okay under power than look for problems on the rest of the system. As has already been said maintenance may be needed. Clean sawdust and/or debris out of the headstock. Oiling the motor and Idler sheaves may help and should be done anyway at this point.
Let me ask did you get a manual with it? If not check the link below. At the bottom of the page are Summary Manuals for the Mark 7, Mark V 520, Mark V 510/505 and Mark V 500. Choose the one for your Shopsmith Mark V model. If you're not sure of your model any of the Mark V Summary Manuals will have the same maintenance for the conventional Headstock. The difference between the Mark V models is the table system and related items. A full Owner's Manual would be a good item to have and are available for purchase here on the Shopsmith website.
https://www.shopsmith.com/service/mark/index.htm
Other things to check while the motor belt is removed would be how does the spindle turn. This will check to see if the bearings need to be replaced in the Quill Assembly, Drive Sleeve Assembly or Idler Shaft Assembly. With a sanding disk attached to the spindle, does the spindle turn freely? You will see the upper and lower shaft turn at the belt end also. If the Quill and Drive Sleeve Assemblies along with the Idler Shaft Assembly are turning freely than the bearings are okay.
Again, with the motor belt removed or out of the way does the Speed Dial turn freely and move the sheave on the Idler shaft pulley in and out. A word of WARNING here - KEEP THE BELT OUT OF THE IDLER PULLEY WHILE DOING THIS. You do not want to let the belt wedge in the pulley while checking this. If resistance is felt, do not force it. It may be the Idler shaft Pulley Sheave need more lubrication or simply the oil worked in, or it could be a problem with the gear/teeth on the Speed Control Assembly.
At this point try the suggestions and get back to us with what you find. We are here to help and glad to do so. Let's get your new to you Shopsmith running in top condition.