Or is the eyelet supposed to allow the shock to rotate around the mounting cylinders?
This is what happens, and is meant to happen.
ok, think my bushings have all been worn out then as they’ve always been very hard to move!
No, they get slacker as they wear. You are underestimating the forces applied at the end of the shock (large fractions of a ton or more), the friction you are feeling is trivial by comparison and it all moves fairly freely under load.
What I don’t understand is why there is no purpose made rotating part in the setup,
There is, the bushing in the shock is that part. It’s a very light, small and strong solution for that particular loading, anything that moved freely like a ball race would have to be huge and heavy to take the loading.