I Have a modern road bike, all has been good for 2 to 3 years. This morning my rear wheel/pedals/chain seized completely. I eventually found out the problem was the the wheel and/or axel thread and nut rather than a chain/gears problem. When I loosened the nuts on the thread the wheel turned fine again. But I can't seem to find a point where the nuts are loose enough for the wheel to not seize but be tight enough to hold in place. I thought perhaps the springs on the threads maybe needed replacing as they didn't seem to be doing their job, but I fear it maybe a bigger problem. Before I try to get it seen to, Does this sound familiar to anyone?
I have had that happen when the freewheel body inside the hub has completely disintegrated and a shard of the broken metal jammed inside the hub. The solution then was to buy a new wheel - it wasn't worth fixing (and that was with an extremely expensive Tune hub - :-( ).
Sadly, I think something similar has happened to you. As Daniel commented, it sounds like your hub has seized/jammed and you are only enabling the wheel to turn by partially undoing the nuts (which makes me think that you don't have quick release - is that correct?).
I have to point out here that THIS IS DANGEROUS. If you ride the bike in that condition the spinning wheel could either a) undo the nut completely, thus enabling the wheel to come out, or b) do them back up again and the hub could jam again [imagine if that happens in traffic...].
Please take the bike to your friendly local bike store and ask them to check the hub out.