Yea it really bugs me out. I don't think it's causing any impact on functionality though...

Here's a bit more detail on the components:

C-Record Cranks and Rear Derailleur (used, but not very much wear from what I can tell. Pulleys look good)
IRD freewheel - New
Sram chain - New

I broke everything down and had it regreased and put back together. BB is super smooth. Is it possible that my RD be bent or something and I'm not noticing it? A few things I do notice...

- Freewheel wobbles. I noticed it's not too bad and read it's a normal occurence. Although my Peugeot shows no sign of wobble.

- Not sure if this is normal, but my RD moves back and forth a little when I put the bike on a stand, pedal a few rotations and just watch it freewheel.

-Rear wheel hub is quite smooth.