Hi,
When you are looking for a worn bearing look at the race for wear and
on the bearings themselves for any signs of wear or damage.  The races
and bearings should be clean for this inspection.  If you see heavy
wear marks on the race or roller bearings they should be replaced.
If you replace the bearing replace both the bearing and race as a set
not just one or the other.

For the castle nut.  Make sure the bearing is packed with grease.
What I do is tighten it while spinning the wheel hub until you can
just feel it being held back, some drag.  Then tap the hub with a
rubber mallet and spin and check it again, it should turn smoothly, no
or very very little drag.  Then check where the cotter key hole is and
back off the nut no more then you have to, to get the cotter key
inserted.  The idea is to make it just tight enough to take the axial
play out of the hub/bearing, but not so tight that the bearing gets
hot.

Hope this helps.  Take care and Happy Utility Trailer Building...
RichA
"We Get Too Soon Olde and Too Late Smart"