....But can anyone tell me why as spinning the wheel it would be slack on bottom and tight on top and then vice versa once the wheel was turned.
The rear sprocket is most likely off center, like Steve says try taking it off and re-positioning it. If you had to grind out the hole in it so it would fit on your hub make sure that the hole is ground out perfectly centered, if necessary make it a bit bigger. If no grinding was necessary
still make sure that the hole is centered in the sprocket, we all know just how "tight" those factory tolerances are
If you are 100% sure that the sprocket is centered and the chain
still goes tight/loose then it could be because of -
1- teeth on the sprocket (either one) being "off" - I had a rear one that I could not get to stop doing this, upon closer inspection I found that teeth on one side of the sprocket were actually not as deep as they were on the other side....
2- countershaft bent - I believe that this is why the chain on my folder bike goes tight-loose ever so slightly. Seems that the countershaft must be bent a hair (has done this since new) as I can see the small sprocket wobbeling around, I can see the clutch doing the same thing when I have the cover off.
3- chain could be trying to jump off/not sit properly on a certain tooth. I file the teeth on the rear sprockets to make the tops round. This helps a LOT, also makes the chain drive a lot quieter. It might be a good idea to do the same to the small sprocket as the teeth on it are just as sloppy, however I have not found this necessary (so far).
Also don't forget that when pedal starting the bike there is a big load on the chain tensioner (as the slack side turns into the the tension side when doing so), if the tensioner moves (twists) even just a hair it could cause the chain to jam (and break). Make sure it doesn't move at all, I had this problem on my last bike, solved it by tack welding the tensioner to the bike
The smaller the rear sprocket you use the less pronounced this problem is because of the sprockets smaller diameter - example: a 36 tooth sprocket will make the chain loosen-tighten a lot less even when it's off center compared to a 44 tooth. The bigger the sprocket the better your centering has to be.
Hope this helps, Dilly Bar Rob