Hi Cobja,
Normally, the flywheel should turn reasonably freely, except for where the engine compression is at its highest. If the issue is happening with the head off then there are other items that it could be. From time to time the flywheel can be tight - it can be caused by corrosion or misalignment of the coil cheeks or just crud under the flywheel. It can also be caused by crank related problems. The extent of issues will be easier to diagnose once the flywheel is off.
In terms of getting the flywheel off, the nut is captive and sits on a taper so you need to loosen the nut until it goes tight then give the spanner a bit of a tap with a hammer and it should come free. You will need to have a way of ensuring that the engine cannot turn over when doing this to ensure that you get the nut to overcome the tension of the flywheel. Whilst I do not have a manual for these engines, the Mk 2&3 Midgets are similar in the way that they come apart and a manual is available here:
https://www.outdoorking-forum.com.au/forum/ubbthreads.php/topics/6293/villiers-motors-manuals.htmlEdit: noted that Jack has provided a G series manual which will be of greater assistance.
Hope that this is of some assistance.
Kind regards,
Sir Chook