He wants Jack. Not trying to be flippant, here, - au contraire, I agree with everything you've written concerning Ennis in your recent posts in this thread, Katherine. You've spoken my mind.
The "not want to know nor feel that it was Jack he held" is a description of the short story situation as it was or may have been, fairly soon after the two of them had initiated their sexual relationship. It doesn't hold true for the later events. Nor is it an objective description, but subjectively seen by Jack through the lense of 20 years of disappointments and twarted hopes and dreams, in the narrative following on the heels of a devastatingly hurtful quarrel between the two. Hardly the best circumstances in which Jack might give a level-headed evaluation of Ennis's state of mind back in the day. And moreover, it is a stepping stone leading up to the conclusion he's working towards: That they haven't gotten very much further, despite all that time. Clearly they have gotten *some* tiny little way, even in Jack's disappointed mind. And the way they've gotten, is (for instance) that Ennis was later willing to embrace him face to face (the reunion) and was willing to admit out loud that he longed for Jack, specifically for Jack, sexually and romantically. ("Wrang it out a hunderd times thinking about you/I shouldn't a let you out a my sights").
So in my view, even in the short story, Ennis is able to face Jack and face what Jack means to him - though it happens about 1 year into the relationship instead of 1 day into it. Though I admit that when I first read the short story (months before I saw the film), this was not immediately clear to me and I went wailing onto the internet in utter disbelief, completely incredulous and devastated that "the fact that Ennis didn't want to know nor feel that it was Jack he held" didn't "mar the memory for Jack".
How *could* that not mar it? And if they'd really gotten no further, if Ennis still couldn't face up to and admit who he really loved, how could Jack bear to still be there, 20 years later?
The film then came as an immense comfort and reassurance to me, because TS2 IMO completely removed the above questions from the equation. And the movie flashback, the way it's filmed with Ennis looking at Jack's profile, did the same. There was no doubt in my mind any more. In the film, Ennis faces up both to Jack *and* his love for Jack - and Jack knows it too.
The way film Ennis acts around Jack and in relation to Jack through the long years - as detailed in one of Katherine's posts above, - Ennis would have to be completely sleepwalking through life, entirely oblivious to absolutely every emotion and desire, if he wasn't in fact aware of and admitting to his feelings for Jack (whether he uses the word "love" or just calls it "this thing" to himself is not important IMO).
The tragedy just becomes *more* poignant in that Ennis *is* aware of and acknowledges to himself that he loves another man - but considers this beautiful emotion within himself repulsive, in accordance with his childhood conditioning and the shared opinion of the society he lives in - and is never able to move beyond that to actually live the life that he truly wants (and is ashamed for wanting). It also, to me, makes it more understandable why Jack would manage to wait nearly 20 years before making half-hearted attempts to move on. Knowing Ennis loves him but is unable to move past society's judgement IMO is something else, - emotionally more nurturing, providing more hope for the future, - than being with a man who won't even admit to himself (much less to Jack) that he loves him.
Whether Ennis thinks of himself as not just loving Jack, but as being homosexual, I'm somewhat less certain about. But IMO, at least by the time he asks Jack about "being stared at in the street", he has come to this conclusion concerning himself - he doesn't any more think of himself as a straight guy who inexplicably has happened to fall in love with a man.