if you're a righty, most people set it up so you reel with your left hand, with the line coming out of the front (not underneath the reel).
Maybe you have the reel on backwards?
If so, you could strip the fly line and backing out, leaving it tied to the reel and just reel it all in again, taking care that the line doesn't build up on one side of the spool. When you get to the end (the front part of the fly line), slip it in the front of the reel.
If you're a lefty, or want to reel with your right hand for some reason (some do), then you may need to change the drag-- if it can be changed ( a pic would help).
The reel should be fine for bass, panfish and trout, you can apply pressure directly to the line with your fingers by pinching it with your off hand and stripping in the fish when it's ready to come your way. Steelhead might be a bit tougher to land. You'd want to use your fingers there too and pinch outgoing line and strip incoming line. The problem is that you usually fish steelhead in moving water they often make several runs, and it may be necessary to chase them. If you're wading and fighting a big strong fish like a steelhead, it's tough to control slack floating line that will start billowing downstream if you're not fighting a fish from a reel (the reel will take up the slack as you reel).
So by today's standards, most folks would opt for something with a better drag, (typically a disc drag) for steelhead---- but it sounds like your reel is similar to a Pfleuger Medalist with a simple click and pawl drag, and TONS of fish have been caught on those old no frills reels. Don't let a lack of designer gear stop you, fish with what you have-- you'll either make it work..... or..... you'll have some great stories to tell on the board