Hello every one and thanks for your help. Here is the diagnostic plan:
1. I will try another cassette. I have a second from the manufacturer who is being very helpful.
If this works then cassette 1 is faulty and end of problem. If it does not work:
2. If this doesn't work I will swap the free hub for a standard Shimano freehub and put on a standard 10 speed cassette. If it shifts well I know it is a problem with the Capreo parts or the Capreo freehub.
3.if it doesnot work the problem is in derailleur shifter chain or cables and is probably not the fault of the hub or cassette.