Sounds like it's stripped. The bike either won't run or you'll damage something soon running it like this. To get it out for an asessment, you'll have to pull the rocker cover and raise the barrels a bit, so count on getting a topend gasket kit, and least a new tensioner assembly. Depending on wear, the leaf spring that applies tension to the chain may have to be replaced as well. This isn't in Jonesy's pic, but if you've seen the rear suspension on a pickup, you know what they look like. Except this one is just one metal strip covered in a rubber/plastic compound that wears with time, even with perfect adjustment to the mechanism.
The reason yours is just turning non-stop is the gears that mesh in the middle have distorted and are slipping. You may be able to get the nut off if you hold the slotted screw part while turning the nut, or you may have to cut off the nut like I did before it will come out. I did mine with a carbon blade on a dremel, painstaking but it worked.