brake grind/drag (tried "cleaning", no go)

I am getting some grinding noises coming from the front brakes, wanted to see if anyone has any thoughts....

Symptom Synopsis:
Grinding Noise, like pads running out with a rhythmic component like lightly warped rotors. Observed while stopping <10mph, and while turning in either direction at any speed. No real difference in pedal feel or stopping power noted. Noise seems to be slowly increasing over time. No warning lights of any kind displayed. MPGs have been off, averaging around 45mpg instead of 51-52mpg. Have generally attributed that to first summer in PHX (110+ temps, lots of AC) and wife driving car most of the time. Under cooler temps and better conditions it _seems_ like I can get up around where I should be.

Background:
2005 Prius w/ 35k miles. Salvage rebuild at about 18k miles, over a year ago.

What I've done so far:
- jacked front wheels one at a time and spun with car on and in Neutral. Wheel seemed stiff, and had a ratchety feel. Not sure if TC/VSC/ABS is still in effect to protect e-motors? Observed some grinding noise while turning both wheels. Is there a way to get the car off and in N?
- removed left front wheel. Rotor hard to turn, ratchety. Pads looked to have plenty of meat. Rotor had some scoring, but not bad. Some rust on edges, but no rust on rotor faces. Pads seemed to be in full contact, which surprised me a bit. I have a pic of that at home, will upload later.
- We have had a lot of rain the last 2 months (at least for Phoenix), and I had read the threads about "cleaning" the brakes. Went out and did 5-6 long (1/2 mile) down hill runs at ~40mph in N with the brakes dragging. Also did 5-6 full panic stops. Then did 1 longer downhill run ( ~ 1 mile) on freeway at ~65mph in N with brakes dragging as much as possible. Lastly did 2 ~1/4 mile flat runs with ICE at full power, and brakes engaged to limit speed to ~20mph. Net result, brakes hot but still noisy.

Anybody have any thoughts? On a traditional car I might have suspected a sticky caliper, causing brakes to drag and overheat warping the rotor. Seems weird that it would happen on both wheels though. I also though the Prius calipers had a feature to pull the pad back off the caliper to reduce drag. Couldn't see that in action, though may have been related to the test circumstances.

Thanks in advance,
Rob