I found his advice helpful, but why would anyone use a reamer bit like that?!? One slip, and you could get a nasty injury.
That's why I use my mini Dremel. Much safer.
TaterNutz: The groove in the rollers is normal. You just can't avoid it over time, especially when a trackball gets daily PUBLIC use. Under home use, the groove probably won't increase much. You should post pics so we can see HOW worn it is. There's a point where the ball has room to skip above the rollers, and that's no good.
The diagonal movement you spoke of... you have to be careful that when you oil the bearings, you don't get oil on the rollers, or on the ball, or in the bearing's middle where the rollers fit in. The rollers need good grip in the bearings. The ball needs grip on the rollers. Any oil in these parts and you'll get slippage (which means the encoder wheel isn't turning)