So I opened up the G500 and found an inherent flaw in the design of the scroll wheel.
The main piece of the wheel is made of some metal (maybe stainless steel?). That wheel has a ridge in the middle, where a gripped rubber band has been fitted to be flush with the metal, which is what provides grip for the fingers on the wheel.
At first I thought my issue was a lubrication problem, but as it turns out there is no lubrication nor bearings within the mouse. The wheel axle simply lies between two notches in a plastic mount.
The scroll wheel mount is something like a semicircle of clear plastic which encases the bottom half of the scroll wheel inside the mouse. However, the tolerance between the mount and the wheel is very, very little. Probably less than 1mm.
So the two problem factors are: the tolerance and the rubber grip.
Over time, the rubber grip has loosened off the metal wheel ever so slightly probably due to heat and use. It looks to me like it's made of silicon. That tiny loosening apparently exceeded the tolerance between the mount and the wheel, and thus the rubber grip was rubbing against the bottom half of the plastic wheel mount inside the mouse body, causing the friction.
I was able to carefully remove the scroll wheel and remove the rubber grip, which is my temporary solution for now until I can think of something better. It's still usable without the grip, but might get slightly uncomfortable after prolonged use. I wonder if I can shrink the grip a little, or maybe shave some of it so that it fits more snugly. Or perhaps I may have to shave off some of the interior of the mount. Not sure. Or maybe I can find a rubber band that will fit as a new grip.
Anyone know whether silicon can be shrunk? Even if it's by a very little amount.