Andy,
Welcome to that part of the asylum that is especially reserved for M type users.
The first time I tried to adjust the cross slide it just about drove me potty, it's one of those occasions when "simple" which the mechanism is, doesn't mean "easy".
The procedure I use is to remove the whole of the feed screw assembly, and throughly clean it taking care not to allow the small leaf type pressure spring inside the micrometer dial fly off into some dark corner. Then adjust the gib strip screws aiming for a nice silky movement when moved by hand.
Lubricate the screw with medium grease and the micrometer assembly with a light oil. I use gun oil because it doesn't gum up as badly as some others. When you put it all back together, don't fully tighten up the grub screw you mentioned, leave it just lightly in contact with the flat taper.
The handle locking set up acts as a crude thrust bearing. Tighten the inner nut using a box spanner until it just starts to resist, then pull up the outer nut to lock it into place. Try the handle and see what you've got. From there on it's just a matter of sickening off the outer nut, and nipping up the inner one just tad, and repeating until you get what you feel is acceptable. Only when you're happy with the action do you fully tighten the grub screw.
I've tried the PTFE washer thing and it sort of works for a bit, then it compresses and needs adjusting again; non starter in my view.
In fairness I've got the backlash down to about .006-8" which is bearable (pun intended) but I'd like to see the back of it altogether. I'm sure you're right, the best option is some proper thrust bearings and that's going to be one of my first projects when I get my new workshop up and running.
As Swarf! says the Drummond forum is a clumsy effort, but there is a lot of good stuff in there. I've asked about the mod you and I are contemplating but didn't find anyone who had done it. It's common enough on the Myford 7 series lathes though.
Eug
Edited By Eugene on 27/05/2017 17:06:04
Edited By Eugene on 27/05/2017 17:07:55