It would seem the pawls inside the free hub are not working properly. It's not a problem I've seen with cassettes, but quite frequently with freewheels.
I'm not sure if they can be cleaned out and relubed. If my guess is right, a new free hub shouldn't cost more than $20. (In NYC that might be $35 because of all the taxes and other charges you NY'ers are subjected to. Take it to Jersey, it might be cheaper.
Maybe another member will have an idea of the cause, and a less costly cure.