BCRider

What you see there is a dust shield and not a retaining nut. When you gently pry that cover out you'll see the outer wheel bearing cup. That wheel bearing cup also has a couple of slots around its outer edge. The cup itself is the retainer that holds all the guts of the freehub together.

They are on TIGHT! I made my own removall tool by grinding and snapping off and then grinding to shape an old notchy planer blade. I then held this "screw driver blade" in my bench vise and had to remount the freehub to the wheel so I had the leverage needed to break the cup/retainer loose. Do not even think about trying to make a similar tool using regular steel stock as it will just bend on you long before the cup breaks free. The torque needed was pretty much on par with removing a stubborn freewheel. And if you've done any of those you'll know that isn't trivial.

However there is hope for you. I've cleaned and lubed my own freehubs lots of times without taking them apart. If you remove the rubber seal along the inner face if it is there (Only the better freehubs use one) then you can flush out the freehub using solvent by dunking the hub in solvent then lifting it out. The solvent will fill the insides and then drain out when you lift the hub up. A soak for an hour and then repeated dunkings to flush the insides will remove any sort of grit and old oil. Following that a spray clean around the gap at the rim of the bearing cup with brake cleaner from an autoparts store will blow away any stubborn remnants.

If it is still crunchy then it is due to rust and there's nothing you can do about that anyway. The couple that I took apart that were rusty invariably had rusty bearing seats as well so even new balls would not last long. So if it is still crunchy get a new one.

Assuming it's now flushed and silky feeling the lube operation is just another dunking but this time you want to use a fresh mixture of some heavy oil like chain saw bar oil and solvent. For this I recomend lacquer thinner so it will evaporate sooner. Mix equal parts oil and solvent and use a smaller container so you don't need a lot. Dunk the hub, remove and spin a few times then dunk again, spin again. When it's fully loaded and spun lift and drain and then set end down on a paper towel to soak up what drains still. Let dry for a few hours and it should be smooth, and have a nice muted click to the pawls. The thicker oil will last longer.

Grease is not something you want in the freehub. Grease on the pawls will prevent then properly snapping out and engaging the teeth and you'll curse at how often it fails to catch or skips. Oil is what you want and even then just a thin coating of something that won't wash away with the first rain. Hence my own choice of chain saw bar oil. I've got freehubs that have 3 or 4 seasons of Pacific North"WET" rain commuting and they are still silky smooth.

But DO try not to direct the hose directly towards the end of the axle and freehub in the future. Yes it's grimy in that little cavity but when you "clean" it you drive the grit inwards along with water and neither does any good in there. If it's really bad just scrape away the worst of it with a narrow blade flat screwdriver and leave the rest. Some use a split ring seal between the axle nut and this dust shield and those provide a better resistance to stuff getting in but there's still the thread in the outer shell. None of these shields screw in so there's still a path for dirt and grit via the threads. I seal those with grease but if you blast at the area with a hose it'll force the grease out and leave the path open for the grit. So no solvent or hose spray at the shield.

The slop they have is due to the use of shims to set the play. I've adjusted one hub that was super loose but on the whole they set them up pretty close. I only had the shims I needed because of the couple of rusty ones I had taken apart. They are not a normal part you can buy and in fact the freehubs are not considered to be a servicable item normally so most shops just chuck them rather than save the shims or pawls for other customers' needs. So there's really nothing you can do about the slop unless you have a big supply of hubs and don't mind making a suitable cup driver.