When you service a lock cylinder use graphite lube... any oil based lube will attract dirt and dust and will cause problems down the road.

In a pinch, WD40 will unstick a lock but it is not what you want to use on a regular basis.

MY krpto has been been a very reliable and smooth running lock for 3 years and it gets used daily and was my lock when I worked as a messenger... this meant it was getting cycled about 100 times a day. You do have to make sure the key is aligned and mis-alignment of the key is probably the biggest problem people have with Krypto locks.

If it really is defective I'd get another... Kryptonite's service is very good and they make a good product.