Garage Years:
The only part I'm perhaps struggling with is why turning off squelch does not seem to produce the same "noise" on an open channel; i.e. tune off station, defeat the squelch and I would have expected a similar noise experience (since the AGC should ramp the receiver to max gain).
This might be explained by the AGC circuits chasing a constantly changing
signal level causing wild swings in level at detector.
Also a weak signal (caused by agc) may actually produce more noticeable noise than no signal at all due to the pressence of a carrier for the noise to modualte.
BTW That is an attempt to describe some very complicated theoretical stuff that I learned much to long ago to be more precise about.
Also it does not necesarily have to be a fully shorted turn, any flapping or intermitantly connected conductor of "magic" length or distance from the antenna might cause rapid level shifts by reflection/cancelation.
The ADF wire certainly looks to be in the right place to be a suspect.
If that is not the culprit I will go back to thinking about how the prop could be unbonded above a certain speed...