If you have the maintenance manual, you are that far ahead of the game.
Probably you have a bad spindle. There are two results to a bad spindle. One is heat caused by bad bearings, high friction (no oil or too tight a preload). The other is a bad finish (tool and spindle loose in bearings). Hopefully someone tried to put new bearings into the spindle and did not know what he was doing.
The spindle comes out as a assembly. Lower the table all the way. Lower the quill about an inch and remove the set screw in the back of the quill (1/4 X 20). spin off the quill nose (right hand thread). Knock the assembly out (down) using a broom stick from the top. Examine the spindle. There is a stack up of inner bearing race spacers and one outer bearing race spacer on the two precision (class 7) bearings on the bottom. Yes the top bearing outer race is very loose. It is there to prevent rattle.
The bottom two bearings if set up correctly will have their outer races turn together, very smoothly and will have some sort of marks for their correct alignment. As they wear eventually turning one race will not turn the other. The quill nut puts pressure on the outer races and keeps them together and prevents up and down movement of the spindle inside the quill. Therefore when installed in the quill, the quill nut should NOT BOTTOM OUT on the bottom of the quill. You should have some sort of gap there. I do not care if this gap is .002 inches or .040 inches. I usually spot drill the quill nose through the set screw hole so the set screw is below flush (important).
George
(Note: The opinions expressed in this post are my own and are not necessarily those of CNCzone and its management)