I picked up a (mostly) new public D8 last weekend from their warehouse sale. It has an 8 speed shimano nexus and horizontal dropouts, and appeared to be in great condition except for a few dents in the fenders. Public didn't have details but said most of the warehouse bikes were hardly used and just couldn't be sold as new, whatever that means.
When pedaling in gears 4 and lower, it feels rough - like something is grinding or not quite meshing properly. The roughness comes through the pedals. When I powered up a short 10% grade in gear 2 the other day, it was especially bad. Gears 5 and higher feel just fine. We have another (brand new) bike with also with a nexus 8 hub, where all 8 gears are nice and smooth, so I am pretty sure there is actually something going on with my bike.
What sort of problems could cause this, and how would I go about fixing it?