Husqvarna 128cd starter rope will not retract

The flywheel key has likely sheared. Contemporary utility 2-cycle flywheel keys are integrated into the flywheel. A new flywheel will be likely be required.

Check the recoil spring in the starter housing, sometimes the rope rotor can jump out the hook on the spring.

remove recoil starter ,three screws hold the cover on,two from the top and one on the bottom.check for broken recoil spring or jamed pulley.

I'll send you a link to the 'illustrated parts manual'. pretty straight forward, just unscrews to remove. timing gap should be 0.25 filer guage.

Here is a link you the IPL, shows complete brakedown od machine.

if it wont rewind you have to remove the recoil that retracts the rope replace it or repair it

Take the cover off and look under it, you should see a plastic round disc that the rope winds on, You will need to locate the string and get it out of the cover where it passes through,once this is done, you will have to turn the disc the correct way to tighten spring ( you should be able to feel the pressure building as you turn, if not go other way, or the spring is broke, in wich case you need parts. If all is well, when you feel tension on it and have enough....not to much...just think about how much pull you had before it broke,because when the rope comes out it gets tighter towards full pull of rope, HOLD tension and put string through the hole on cover, once you have it through tie your handle back on, you should be able to release and jossle to get the rope back in the groove, Place on machine and see if you have enough tension that it will retract in cover when pulled and let go, if it does not you will have to repeat procedure, and tighten spring.....Do not get carried away with the loading of the spring......TIP you can shorten string if you just lack a little bit of it retracting in cover because it gets tighter when pulled out....Good Luck!

Either you have a broken rewind spring, or the starter mechanism is dirty to the point where the force of the recoil spring is not sufficient to pull the rope back in.
WEAR SAFETY GLASSES while disassembling your starter mechanism to see what the problem is. Upon reassembly, it is a good idea to lube the post in the starter housing (the one the pulley slides over) with some graphite or teflon lube.

Most of the rancher models are easy to look at. Take the four screws off that hold the starter cover on.When off have a look to see if the pulley is ok or one of the starter dogs(pawls) is jamed . If dogs ok take the screw out of the centre of pulley and remove it ,check for spring tension. if there is just be carful to leave sring in housing. look at spring if broken or out of shape renew it and rope.check for cracks in pulley. When renewing spring and rope get correct rope length and diameter. don't over tension new spring. hop this helps