Do you have the impeller on it? If so, the spring loaded graphite seal pushes against the bottom of the impeller, so can be what is making it hard to turn. That is normal.
The shaft shouldn't be hard to turn at all with the impeller off. The only resistance it should have to turning is the oil seal that is just above the bearing. Try lubricating the bearing and the shaft around the seal with a little motor oil. Also check to make sure the shaft is in line with the center line of the cage. If its not, you may have gotten the bearing in wrong, so its binding a little, possible bearing damage if that is the case...
The water thrower should have a space between it and the oil seal, so it sounds like you are ok there. Make sure the outside edge of the water thrower is reasonably straight and that it does not touch the brass cage at all.
After my last TR7 water pump rebuild, I made the decision that its well worth the $300 to get a new one from Wedgeparts, rather than deal with rebuilding the !#$%# things.
Oh, when you do get it all back in the car and start it up, don't freek out if you get a little water out the hole in the side of the block. The graphite seal and mating surface on the bottom of the impeller have to get seated in good.
If its still leaking after about 30 min or so, be concerned. If its still leaking after an hour of operation, freek out...
Changing a TR7 water pump is a fairly serious undertaking compaired to about any other car, and rebuilding it is not as simple as the manual makes it look. If you have any serious doubts about the pump you have, or install it and it doesn't work out, Wedgeparts has the lowest price on them I have found. $329.95 at the moment, wish I had bought one or two last year when they were $249.