Checking that the dynamo hub works
After some pondering, I ended up buying a new hub, hoping to replace the center part without the need to re-build the whole wheel. I share here some information that might be helpful:


even the new Dynamo showed electric contact between the two terminals, so they are NOT isolated from each other and checking that is no proof the dynamo is broken.
opening the new dynamo, without the lever of the wheel to help, has proven challenging even with the proper tools. I had to build a custom one with a plank of wood, drill a hole and nail the dynamo to it. This way I could close the dynamo in a vice and use the plank to apply enough force.
after I successfully replaced the dynamo, I tried to put back together the old one, just to keep spare the parts. As I did that, I rotated the dynamo and felt current on my fingers. I was able to isolate the little wire properly and now I have 2 working dynamos


It is clear, at least to me now, that a dynamo that is short-circuited is very difficult to turn. When the little wire is not making contact the dynamo spins much more easily.