Does this look correct? I put it back the same way but since it never worked maybe it was incorrect in the first place.
The way it works is when you press the switch to lock the diff, the little motor inside rotates the big sprocket using the worm gear, which winds the spring. Then it's a matter of aligning the locking sleeve and the crown hub, and the spring instantly pushes the lock sleeve into the crown. This action won't happen until after you align the lock sleeve with the crown hub.
Aligning happens when both rear drive axles turn at different speeds. You can do this by turning all the way left or right and start moving slowly forward or backwards (which ever way is more convenient on the trail), until eventually the sleeve's teeth align with the grooves on the crown hub and the spring is able to push the sleeve into the crown hub, locking the left drive axle solid to the crown, and the dash light stops blinking and stays ON. It only blinks when this movement has not been completed.
This aligning can take from a few inches of movement forward or backwards to a few feet. I kinda depends on the tires' friction to the ground.
I see in the video, that the little gear on the motor doesn't turn. If you say that the big sprocket inside turns, as it seems in the video (the motor slightly moves when it winds the spring), then it's something to do with the spring, or the whole big sprocket no being adjusted correctly to the electric runways in the plastic cap, although I don't remember it having an adjustment setting when you put it together. It's not like the actuator on the transfer case on the newer transfers where it must be set to a correct position before reassembly...but dont quote me on that for the rear diff lock actuator.
When you mount the actuator back on the diff, make sure you first manually lock the diff using a flat screw driver, then mount the actuator observing the matchmark on the little gear as per the instructions (after you find out why the little gear doesn't rotate as in the video). Here is a pick from the instruction manual.
Here is the instruction: