Bicycle Mechanics - Rubbing chainweel--what solutions are there?

I've been riding my Shadow Conspiracy 24" cruiser for a while, and have been very happy with it. Opposed to a gear-based mountain or street bike, I was looking for something mechanically simpler and lighter, but not anything as small as a traditional BMX.

The bike came in a few pieces to save space, and I didn't have trouble assembling the parts. However, one day I was riding and found I couldn't pedal easily at all, as if the bike were traveling through sand. Every successive pedal seemed to make more resistance. My friend looked at it, and said the crank itself was loose, and tightened it. The bike rode again.

Recently, the bike has reverted to the "sand" quality, and I discovered the chainwheel has been driving into the rim of the tubular part of the crankset. The black paint had been stripped off altogether due to friction.

I tried rearranging washers to push the chainwheel outward, and it seems to behave better, but I fear for the bike's performance and for the problem to reoccur later.

My question:
Ought I to grease the crank's extensions/washers, tighten the bolts pushing the components of the crank inward/loosen them? Loosen the bolts that clamp the crank arms? Rearrange the washers?

Thanks in advance, sorry if this is too extensive. :x

ok. so your chainring was rubbing into the bottom bracket shell edge of the frame, right? if its a 1piece crank, the adding or rearanging of the spacer washers to move the chainring furthur away from the frame will work fine, as it doesn't really affect the drivetrain angle. i have done this myself and i own 6 cruisers of my own. and i have personally had this problem, if it is what i think it is. a 3piece crank with this problem would be proporly be fixed with a longer crank axle to provide the proper clearance. i hope that helps a little. if not, id need more specifics. crank type and brand?

Hi! Thanks for giving this one a look. Before anything, I'll list the bike's components, according to Shadow Conspiracy:

Frame: 100% 4130 Chromo Sanko
Double Butted Tubing
Fork: 100% Chromo
Handle Bar: 2 pc Cruiser Bar
Grips: Shadow Ol’ Dirty
Stem: 06 Shadow Attack
Headset: Shadow Corvus Sealed
Integrated
BB: Euro Sealed
Cranks: 3 pc 4130 Chromo
Sprocket: Shadow 36 T Crowgora
Chain: Shadow Interlock 02
Hubs: Sealed with 16 T Freewheel,
rear 14 mm axle
Seat: Shadow Crow
Seat Post: Shadow 4130 Mean Lite Post
Seat Clamp: Shadow 06 Alfred
Tires: Kenda K-Rad

Yes, we're dealing with a 3-piece. Now, I've been experimenting, and apparently after riding the bike around for several minutes or so, the chainring will start to move into the frame. Slowly, but it happens. I know when I last moved washers around that the chainring had no contact with the frame. I would also like to point out the spoke/axle/place-to-fixate-arms on the chainring's side of the crankset seems very slightly bent. My friend said this behavior is actually normal, but I wouldn't know what to think of it.

Here's a few pictures of the area affected (my apologies, I only have a cameraphone on me):
Damage to the chainring (http://img155.imageshack.us/my.php?image=chainringdamagecd5.jpg)
An indication of proximity from chainring to frame (http://img220.imageshack.us/my.php?image=chainringproximitytofranf3.jpg)
A view of the general crankset area (http://img353.imageshack.us/my.php?image=fullimageqa5.jpg)
Opposite arm, with threading of crank exposed (http://img220.imageshack.us/my.php?image=oppositearmthreadedki3.jpg)

The one thing I'm not sure with, is the threaded part of the crank itself, a little sticks out of the frame for access. I wonder if it's being unscrewed while I'm riding and moving in a certain direction. :x

Either way, I appreciate all the help I can receive, and hope I've given enough information.

the pictures help a little. so to me it looks like the teeth on the chainring are bitting into the frame behing the bb shell along the drivetrain side of the chainstay. strategically placing washers to try to space the ring out from the frame will only work temporarilly if at all. id ask you if the bb has ever been taken apart and reassembled. if so, was the axle put back in backwards? longer end goes to the drivetrain side to provide the extra nessacary clearance to clear the front chainring. if not, id say you needed to get a longer axle so you could clear the frame. as far as crankcase threads being exposed, that would depend on the type. the bearing cup on the driveside should thread all the way into the frame and then the bearing cup on the otherside would have about 1/4" or so exposed for an outter ring to be threaded onto it and tightened snuggly to the frame, as this ring helps the bb bearing cups from backing their way out of the frame and causing your bb to loosen. hope this helps.

OK, I think these new images may help a bit. I decided to dissect the entirety of the crankset in hopes of determining the problem. As you will see, I rearranged one of the bearing cups to create what I perceive to be more symmetrical:

1.) When I first removed it, the bottom bracket set resembled this (drivetrain side on the right):
http://img375.imageshack.us/img375/73/16027315hu1.jpg

2.) I noticed the drivetrain side already had a bearing cup:
http://img261.imageshack.us/img261/7513/53126298cv5.jpg

3.) Here's how I rearranged the components...:
http://img157.imageshack.us/img157/1851/26166478le4.jpg

4.) ...then how I fed it into the bottom bracket housing:
http://img157.imageshack.us/img157/2819/93331690hr3.jpg

5.) Finally, what the bottom bracket resembles now (with the outer ring tightened fully as you instructed):
http://img300.imageshack.us/img300/7712/90580622nk2.jpg

I couldn't find any real diagrams of what a bottom bracket set is supposed to resemble, I get a lot of them which are completely sealed as a one-piece item. I really don't have an idea as to whether this switch is a good idea, but I am very certain the original order of the components on the bottom bracket are as they appear in image 1. Is this new configuration workable? Thanks in advance!