All your symptoms sound like a badly adjusted cable and not deterioration of the internals of the hub (although they will fail if you ride around with a badly adjusted cable).

It is very important to follow the instructions for cable adjustment on in gear hubs. If you don't have a manual for the adjustment this download from Sturmey-Archer contains the info you need. It is for a hub with an internal brake, but the gear adjustment should be the same.

Many people think you can adjust a geared hub just like a derailleur, ie just twiddle the adjustment until it sounds ok. This is perfectly ok for a derailleur, but it is really bad for the geared hub which is dependent on several critical parts being correctly aligned internally, and this can only be achieved by following correct adjustment procedure.

Often young staff in bike shops are the worst offenders because they have no knowledge of hub gears.

Once the hub is correctly adjusted it will stay that way unless the cable is disturbed (eg remove back wheel) or if the cable "stretches" (after installation of new cable)