I have a version II and it is nearly silent ..... Have you tried the different modes?
A grinding noise would concern me too.
I think if it were mine I would consider returning it if possible and get another one.
After more extensive testing last night, my conclusion is I'm too paranoid! The noise is there if I really try to listen to it. I also noticed that the IS is a bit louder at 200 than 70. Thanks for checking Joe!