Ian, I had the same many years ago assembling a beetle case.
Got stuck while tightening the case bolts. I did not try it half way like you did, so after the torqueing I was looking very proud what I had achieved only to find up it was locked up, just like you have.
I split the case and found a bearing that moved and the dowelpin pressed itself in the bearing while tightening the bolts. Really, it pressed a new dowelhole in there. So...I got a new bearing and redid it. Same thing...but now I found out while tightening....but already too late, another bearing unusable, again the bearing seemed to have moved away from the dowelpin. I ordered another one, and now in the correct size
Measuring is so important (besides cleaning) since the tolerances are critical.
Good luck with the build, it is super great to see you building this engine.