So I dismantled it and cleaned, lubricated and reassembled it then tried it with my blackface reissue and there is no hint of the distortion I heard when I tried it at the sellers place. Guess it must have been an idiosyncrasy with his rig.
Pretty nice unit all around... REALLY like the sound. More so than my 2007 version of the same thing. This one is from one of the first production runs after Dunlop took the whole thing over (1986 IIRC).