Well it took some investigation but here was the culprit: The dust/water seal on the rear wheel, made of some kind of rubber like stuff, was making the sound when the wheel was rotated. Had to disassemble the cassette to get to it. Lubricated it with a dry teflon stuff made by Dupont, no longer sold, and reassembled.
Noise is gone.
I was 100% convinced it was the rear der. when I started to fix this. Called my LBS and they said this was not an uncommon problem on Shimano wheels but the issue usually is the dust seal slipping out of its position.