Binding during rotation suggests that the head tube faces and/or fork crown race seat are not milled perfectly perpendicular to the axis of rotation. The "indent" you describe is likely a result of fretting damage to the crown race, either from inadequate lubrication or maladjustment or both. When the frame is not milled properly, it can be impossible to properly adjust the headset so it turns freely throughout its range without slop or binding, so the problems can be related. Open up the headset and inspect the races, particularly the crown race, for damage. If you decide to replace the headset, have the frame and fork properly milled before installing the new headset.