So a few observations:
- the only way the axle can get grooved like that is if your hub loosened up too much and one of the loose balls fell down inside the driver.
- Dan aka bicyclebones has the clutch rings on the feePay
- don't worry about feeler gauges. You only have two positions to mate the busing and cone together to engage the axle threads into the cone. Just use the smaller gap of the 2.
Excessive brake/pedal throw:
- worn expanders and/or brake sleeve, worn clutch rings, worn out retarder spring, and worn hub shell are the culprits in that order from my experience. If you replace all the small parts and assemble the hub correctly and still have problems then the shell itself is probably worn out.
These hubs work amazingly well with fresh parts and proper assembly. I think they get a bad rap because many have worn parts and have a couple of assembly quirks.