I've had the same wheel with the Sanyo hub for about 4 years or so. The notchiness is normal.

This is one of the hubs that performs basically the same whether the light is on or off, so it won't get much worse when you power a light.

It was one of the best things I've ever spent money on, by the way. I have an even-cheaper Shimano hubbed wheel that also has been great for me on my city bike.