The hoop included in my Stitch-It Kit did the same thing a few years ago. It sounds like the threads on the screw are stripped. (kind of like when the treads of your tires wear down and they lose their ability to grip)
Your best bet is just to buy a new hoop. I'd assume the folks at Chronicle will tell you to return the kit to the place of purchase if you want a refund/replacement, but I could be wrong. The plastic Susan Bates embroidery hoops are very durable, and usually cost around $2 or $3, depending on the size. In my experience, these stand up to lots of use! The Stitch-It Kit is still fabulous with all of those great transfers. . . even if the hoops are less than stellar.