1. That is a rear hub, not a front hub
2. That hub has 'sealed' bearings and does not have adjustable cones.
3. The set screws hold the aluminum axle cap in place on the axle. I cannot recall from when I had the same hubs if the axle cap screws on or if it simply slides on. If you loosen the screw you will find out. Try moving the axle cap so it is a hair further away from the hub body and retightening the set screw. Perhaps this will remove the tension from the bearings or whatever is causing the drag - it might also be the axle cap rubbing against the hub body.
Like I said, I had the same hubs some time ago. I didn't like the rear one at all, but I know plenty of people who rode with them for many happy miles.