Can't work, if you tried to draw work from the needle to the disk, then the disk would rotate harder. Not free!

If needle is straightaway connected to disk  then obviously disk rotation becomes harder because the disk and needle rotate in opposite directions.   Energy from the rotating needle has to be drawn out separately may be by mounting a  generator on needle shaft and energy from this generator should be supplied to central shaft by means of motor fixed to central shaft.

Yes, but what does the generator connect to? One side is the needle and the other side is .......?

How about to another needle on the other side of the wheel and a figure 8 belt connecting them. That way one needle will work against another needle.

Your compass needle is stationary and the disc is turning the generator.

Your compass needle is stationary and the disc is turning the generator.

Compass needle is not stationary.  It has to rotate to align itself in N-S direction.

I suspect lenz law in the generator's coils along with centrifugal forces from the large disk will keep the needle from staying aligned with the earths magnetic poles. I hope I am wrong.

Earth's magnetic field is very week. Obviously the force of attraction between needle and earth's magnetic field cannot overcome lenz's forces and centrifugal force.  Hence I have suggested  a strong rectangular magnet at the base having same polarity as earth's magnetic field.   A very strong attractive force between strong permanent magnet and needle can overcome lenz's  as well as centrifugal forces.

Here the bottom magnet acts as external force and energy is generated by strong attractive force between needle and bottom magnet. (instead of needle, a strong permanent bar magnet can be used)

You mean like this image?

If you put large external magnets on each side of the big wheel, as shown in the image, to simulate a stronger earth magnetic field, then the needle will cause some drag as it gets pulled away from the external magnet that it is attracted to. Perhaps that drag is negligible as you also gain some energy when it gets pulled towards a magnet it gets closer to? So there is no net loss in energy to the large wheel?

The magnet has to be at the base, parallel to the ground / disc.   If you provide magnets on sides, obviously the needle experiences dragging force when it moves out of magnetic field which will not have any advantage as far as energy is concerned and it becomes like other non-functioning magnet motors available in the internet.

The needle should not move out of the magnetic field.    When disc is rotated w.r.t. earth's magnetic field the needle doesnot move out of earth's magnetic field because it covers the entire earth.  So, if you provide a base magnet as shown in the picture which is bigger than the disc,  the needle doesnot move out of bottom magnetic field hence there is no chance of dragging force.

The needle always tries to be in line with bottom magnet which is S-N.   Hence when main disc is rotated, the needle has to rotate  to align itself  in N-S direction.

Yes, the needle will remain stationary but the rotating disc is doing the work turning the generator.

If needle remains stationary,  how the generator coil will rotate?   Work is done by external magnetic field  by pulling the needle  to maintain its direction.  This pulling force is not transferred to the disc.

It will only generate power if you rotate disc.

How much energy is required to rotate the disc and keep it rotating?  You have to overcome only the friction between bottom of central shaft and ground which requires negligible energy input.  It does not experience any opposing force from the magnets.