[PJL]

You are confident it is this switch position as C41 is just changing the tone by adding a parallel capacitor across the volume control.

I would clean the switch very thoroughly as it might be leakage in the switch wafer. Another possibility is the heater wiring is too close to the capacitor or wiring or there is an issue with the earthing point to the chassis.

Do you mean hiss (present all the time in the background) or distortion (occurs only when there is a signal)? If its hiss then does it change with volume? If it changes with volume it would be worth changing the resistors around V1, particularly R27 and R24 for modern metal film types. Pentodes are always a bit noisy and this design has V1 running flat out so I doubt you will be able to get rid of it altogether.

Good to hear it is working OK.