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So has anyone seen this kind of gouging on their hub before? Is it likely to get worse and eventually cause the cassette to spin wildly around the hub?!
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Its a WTB LaserDisc Lite hub and I (eventually) got a SRAM cassette off it today with the help of a screwdriver & hammer. I've never seen anything like this on my previous hubs. I was intending to stick a new cassette on but now I'm not so sure.
yes, I have seen that but it's a pretty extreme version there.
Your cassette, I'd guess, is a cheaper one without a full carrier, and the individual cogs have started to cut into the (alloy?) freehub underneath. Typical with cassettes that are made up of cogs and plastic spacers, the steel cog is harder than the alloy freehub but the spacers softer.
It can be salvaged, with care. You need to file away all the burrs so the cassette can then slide on and off again with ease. And then you need to ensure your new cassette has a full carrier like:
There's still plenty of surface for it to sit on so you should be OK, so get the file out and get filing carefully.