Check the agitator for a nick, as well as check under the rim of the agitator (use a mirror) for foreign objects.
If you find a nick / abberation in the agitator, try sanding it smooth again with a couple different grits of sandpaper.
If there is a foreign object under the agitator that is grabbing the towels, you may have to remove the agitator to get to it (usually single nut at top).
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