Hey
I have an SME Series II Improved with the fixed headshell
If set up properly, it is an amazing tonearm! I stripped mine down to the last screw, cleaned, rewired and put it back together. (There are parts in the service manual where they say to not open certain areas - its worth heeding that advice...) After some colourful use of language, I got it back in order and it sounds amazing!. There are all kinds of compliance info and null point/overhang etc. info online.
Could be an issue with the compliance, or with the geometry you chose to use when setting it up. The ground noise you are experiencing doesnt seem like it would be the cause of the distortion from high intensity passages.
There is a company here in Canada that does a full rebuild/rewire of the tonearm for around 400? I was going to send mine in to be done, but decided to just do it myself. The wire harness they install wasnt compatible with my turntable (DIY heavy plinth Lenco) as I have the arm connected to RCA plugs on the rear of the TT, and there are no provisions for a wire to run from the arm directly to the phono.