Rear hub assembly becoming loose, not allowing backward spinning

Question

I bought a used Kelly's Swag 10 2016 and it came with KLS (Kelly's inhouse wheels rebranding).
The rear hub was not allowing to back pedal freely. When backpedaling, or trying to set the pedals in a comfortable position to start from a stop, the cassette was not spinning backwards following the pedals, making the chain drop onto the chain stay all the time.
This is the assembly:

I went down and disassemble it, cleaned everything, re-greased the ball bearings and put everything back together.
No matter how much I tight 1 against 2, and 3 against 4, leaving no room for the hub bearings to have any play (but still 100% free to move both directions) they become loose again and the issue comes back.
Note that, as far as I know, the numbered parts should not spin once the wheel is mounted. However, when the issue does happen, the they seem to spin on the axle as well, along with the wheel.
So here are the questions:

How do I tighten the assembly so the nuts don't spin with the wheel and become loose?
Is the assembly missing any washers or pieces that could potentially be causing the nuts to rub onto the frame creating the extra friction to loosen them?
What's the proper name for this assembly and can I get spare parts for it? can I do it without having to change the hub itself and rebuild the wheel?
Is it possible to replace it with sealed bearings? that would make it a lot easier to maintain.

Thanks a lot!

David D · Accepted Answer

Question 1: I believe the question is how to tighten the lock nuts against the cones so that they do not loosen up.
The key to correct adjustment is a thin wrench - a cone wrench - that allows you to firmly hold the cone while tightening the lock nut against it. This question has an answer with a nice video from Park Tool showing how to work on a hub similar to yours.
Here's a picture of a mechanic holding the cone with one cone wrench while tightening the lock nut with another.

Question 2: What parts are missing that could be causing problems?
Swifty has identified that the pawls are missing from the picture and you have noted that you do have them along with the retaining wire. It sounds like your key problem is not having a cone wrench to get the cone/lock nut combination good and tight. It is difficult for me to know what might be missing without a diagram of what that hub should look like. Off brand hubs often don't publish diagrams. I couldn't find a diagram for the "KLS Stormer" hub (according to the linked catalog) that is on your bike.
Question 3: Is it possible to replace the cup and cone with sealed bearings?
It is possible but not easy. You would have to replace the hub with a different one (unspoke the hub, find a hub that works with your spokes or get new spokes and build the wheel) or use a different wheel.

Rear hub assembly becoming loose, not allowing backward spinning

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