Doug et al.,
As noted earlier, this is the way that these door locks were designed to work. When the door is locked, the interior cylinder disengages and allows the handle to turn 360 degrees--so that it does not engage the shaft that sits in the pillar. When it is unlocked, the interior cylinder is stabilized, and when the handle turns, it engages and pulls the shaft out of pillar. In the locked position, the slot for the key should be perpendicular to the tail of the handle; when the door is unlocked, the key slot should be parallel (in line with) the tail of the handle.
If your handle is spinning 360 degrees in both positions, it is likely that you're missing the small pin that secures the lock cylinder in its position. If you look on the shaft of the handle, toward the end of the chromed portion, you will see a small hole/channel drilled though, a bit off center; a small pin, about 1/16" (or less) in diameter and probably less than 1/2" long must be inserted there and peened on the ends to stay in there. This little pin secures the shaft from moving when the door is unlocked (hence allowing the door to be opened).
I had the same problem on one of my doors on my 38 panel (i.e., turning 360 degrees), and when I removed it from the door, I discovered it was missing this pin. Once I replaced the pin, the door worked perfectly.
Of course, you must be able to remove the key once you turn it into locked position (perpendicular to the handle tail). I've worked on several of these handles and they often lock and unlock with difficulty--you have to jiggle the key a bit, sometimes, and move the key slightly in and out to make some of these work; others are as smooth as silk. Not sure why, but that's been my experience.
I hope this helps.
Yours,
Jim
