first , obvious, thing is to try another skewer, if you have over tightened it, it may have stripped the thread in the nut end, not completely, butit may have slipped a couple of threads, so the wheel will stay in there, but not grip it firmly. The grinding noise, maybe its the serrated washers on the ends of the axle moving round in the forks, as the resistance of the dynamo,is greater than the grip the skewer has. when rotating the wheel, and its grinding away, look at the 2 terminals, and see if they are rotating as well, they shouldn't do, and my theory could be correct. Let us know won't you ?