ORIGINAL: mclina
It's been a while, so my memory is hazy, but I think that when I switched to a 2 blade prop on my Alpha 40, I needed to leave the flywheel on for it to work. I think that without the flywheel, there was some binding between the prop and the crankcase.
You should take off the new prop and see if the engine turns freely.
You should have been able to press the flywheel off of the drive hub and been OK. The only way for the prop to contact the case is for the hub/flywheel to be missing.