Make sure that the indicator spindle is threaded in all the way and that the links in its chain aren't seized or sticky... after that follow the setting instructions you can find from Sheldon Brown.

After the flushing the act of riding will also improve the function of the hub and you may want to tighten the cable a tiny bit to alleviate the 2nd to 3rd shifting problem.

The SW hub is a pain (and a production failure) and you should be lucky enough to have an AW on your bike...this is not to say that I don't plan on using an SW hub I have stashed away at some future point but as a mechanic I can handle any work it needs..