But I can't get it any looser. I set it just barely beyond the zero tension point where the bolt would be completely loose. When I try to ease back on the tension the front fork is too loose. I'm literally right on the edge between loose and tight.

A month ago I got a new mountain bike with a threadless headset, and it has a more gradual zone to work with where you can adjust the tightness. But my Bianchi ML3 road bike doesn't seem to have that gradual zone at all. This is why I'm wondering if there's a problem with the bearing in the headset.