It was setup by someone that’s been doing it for about 100 years. Did a ton of other local cars. I won’t say it was or wasn’t properly set up as anything can happen and I’m certainly not a diff guy.
Hows the ring gear look? For it to stop turning one wheel it would have to have lost the splines on the axle or spool. I have seen axles not have hardly any engagement and then break when a good amount of power is applied.