As the bike started to wear in, I had slippage with the rear wheel slipping forward on the drive train side in the dropouts, which resulted in the wheel butting up against the frame and anger.
I finally took it into the shop, and they replaced the axle and the nuts which had been stripped from this process. On the ride home from the shop, it happened again. They "fixed" it a second time, and told me that there wasn't much more they could do for it. They pointed out that the riding style (lots of stop and go) leads to high torque and referenced some of the newer Internal Geared Hubs that have an axle with flat ends, like this one. The problem was, they said, is that they didn't know of anyone that sells such an axle that would "fit" the Torpedo. They were reluctant to grind down an axle for me, but said that if i could find one, it could be held in place with slotted washers like these below.
(More picks of the Hub/Axle situation, after the jump...)
The shop said Chain Tensioners would help with wheel slippage, but short of sourcing an axle with flat ends, they didn't have much to offer regarding the axle spin.
An expert in Chicago was kind enough to offer some advice regarding this situation, and had some insight as to possible gear ratio adjustment as lending a solution. I also think it would be wise to sand down the dropouts and get the thick-ass paint off there:
"There is still no option for an axle with flat ends unfortunately. A chain tensioner will still be a good solution for the wheel slipping forward. As far as the axle spinning, the only easy thing you can do there is just tighten the hell out of it. Do NOT file or grind or machine the axle to put flats on it. This will seriously compromise your hub and your safety. One option would be to use a file to put serrations on the outside of the locknuts on the hub. This will help some and not mess up your hub.My Chainring is Specialties TA 110 BCD with 46 teeth. As you can see from the exploded hub below, the cog that comes with the Torpedo has 20 teeth:
Another thing to check is your gearing. The thing that causes an axle to spin on an IGH (Internal Geared Hub) is high torque. Low gear=high torque. The general rule for most IGH is to use a gear no lower than a ratio of 2.2 on a 26" wheel and 2.4 on a 700c wheel:
Ex: 40 teeth in the front divided by 18 teeth in the rear = 2.22 -- this would be good for a 26" wheel but not a 700c.
Ex: 40 teeth in the front divided by 16 teeth in the rear = 2.5 -- this would be good for both 26" and 700c.
Check your gearing: just divide the tooth number up front by the tooth number in the rear. If the result is less than 2.4 you'll have to gear up.
For the most part IGH's are not meant to be stomped on, they are meant for easy pedaling and cruising. If you are geared right and are still spinning the axle you'll need to go to a more modern hub that has flats. Then you can use keyed washers."
So, in my case:
Ex: 46 teeth in the front divided by 20 teeth in the rear = 2.3.
Maybe those extra teeth in the rear are biting me in the ass?

Any progress with the axle spinning in the dropouts? Have a similar Sachs Duomatic hub that will someday turn into a finished steed...
Thanks for the info!
@James, yes! I just have to post it. In the short term, I found that shortening my chain seemed to help, if nothing else so that I could use these MKS Chain Tensioners:
http://www.chariandconyc.com/mks-chaintensioner8mm.aspx
The tensioners seemed to eliminate some of the slide, while allowing me to get the wheel in alignment and keep the chain tight.
Also, because of the shortened chain, the wheel is not so far back in the drop outs, and i used a better pair of nuts too — the kind that have the serrated washer that tightens down as you tighten the nut. I think these helped too... Plus, i tightened the hell out of everythings as well..
I'll post asap.