Hello tobnr -
I have had the opposite issue on my Tree 2UVR (collet won't stay closed) and although the forum has some very helpful posts, none of them explained EXACTLY how the inner workings of the collet closer worked. Since I still have the spindle apart I can provide some good close-ups that may help you and other future users.
As you know, when you pull the collar out to capture the shifter sleeve and move the quill lever down, the collar forces the shifter sleeve (M-1005) up which should unlock the collet. When you move the quill lever up, the shifter sleeve moves downward and if you have the collet nose adjusted properly, you will feel the lever "cam over" with the tool locked in place.
The diagram shows the collet closer shifter sleeve (M-1005) in the locked position. When the shifter sheeve moves upward to the unlocked position, it allows 31 ball bearings (M-1006) to drop downward and inward which in turn allows the collet closer adapter (M-1004) and collet closer nose (M-1003) to move down enough to loosen the grip on the collet.
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There is nothing else going on in there. If the collet is not letting go it may be worn out or perhaps the tapered ground surface that mates to the upper half of the collet is dirty.
So lets talk about the details of the collet closer shifter sleeve (M-1005) The sleeve is a close fit over the spindle and nose that comes into contact with the ball bearings is chamfered. This surface needs to be clean and undamaged. This was not the case on my mill. You can see that the chamfered nose of my shifter sleeve is heavily damaged with dents from the ball bearings all the way around it's periphery. This means that depending on luck of the draw, you could not get it to "cam over" if the balls fell in the pre-existing dents. (Note that this material is VERY hard, must have been quite a chore to damage the shifter sleeve this badly.)
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Finally, if you do not find a simple root cause to your issue and end up removing the spindle this is what you get with it out of the machine. The new shifter sleeve is installed and held in place temporarily with clear tape so that the ball bearings can't fall out. (Note: disassemble and reassemble it in some kind of tray so that you do not lose the bearings.) Note that the spindle bearing nut that retains the assembly is shown and it is 1-1/2 inches across the flats. You will need to make a super deep well socket to remove it - at least 5-1/2 inches deep. My spindle bearing nut (M-1014-A) was cross threaded - for posterity the thread size is 1-3/16 in. and 24 tpi. If you need to make one, use steel that is relatively soft so that it sacrifices itself rather than the spindle threads if you cross-thread it.
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