I overhauled both the front and rear hubs on my wifes Trek bike. But the rear hub was a headache. I have reassembled the thing initially, and it didn’t spin smoothly. I took it apart, and reassembled it. I would tighten the cones, and it would feel like it was starting to bind, so I would back off the cones, and the axle would have some play…too much play! It was driving me nuts. I hub the dust covers with the hollow side in, but I noticed the from had the hollow sides out, so I tried that. It seemed a little better. When I mounted the wheel on the bike, there was still way too much play. I think the rubbing I am feeling is the dust cover which is jammed onto the cone. So the cone is not fully resting against the bearings.
So I had some time last night. I took the wheel off, and partly disassembled the rear hub again. I did one side at a time, leaving the bearings in place. I removed the lock nut, spacer, cone, and dust cover. I used a flat tip screw driver to cake some grease on to the bearings. I inserted the dust cover hollow side in. I screwed the cone onto the axle. When it engaged the dust cover, and kept tightening until it felt like it made it to the bearings. Then I back it off just a smidge. I put the spacer and long nut on. Then I did the other side the same way. I had play with adjusting the cones so that I had equal amounts of axle exposed at the ends to fit into dropouts. I played with the adjustments of the cones, and managed to get the wheel to turn reasonably smoothly without have a ton of play.