I just bought a 95 Kodiak with a 2000lb warn winch on it. The winch works fine going in, but if you try to make it go out It starts to spark where the cable touches the metal. It also goes slower going out than it does going in. Is it possible the short is in the switch or do you think it is in the winch?

 

It almost sounds to me like the connection isn't solid. I would try taking everything apart there, adding some dielectric grease (or light bulb grease - as Wal Mart calls it) and tightening it back down to see if that cures it. That is unless it smells like the motor is burning or something...

 

Sounds like one of the cables. The only thing the old round switchasaurus, or even the newer contactors do is switch the polarity to the motor to go in or out. Sounds like when going in the shorted cable is the - wire, and of course a short wouldnt matter then, when going out, it becomes the + wire and shorts out on the grounded frame. I would replace your wires now before you have nothing but ashes left!