No wonder you aren't happy
It sounds like either the record or stylus is completely
trashed (way beyond normal wear), your dragging a huge fur ball on the end of the stylus or the phono stage is being overwhelmed by the output of the cartridge? If its alignment or tracking force then its a hell of a long way out. The only positive thing I can say is that no, this isn't normal for the deck! Even the cheapest, most tacky turntable should sound better than that.
You say you've tried different preamps so the problem should
be with the turntable or your records. If your friends turntable has a standard 1/2" mount cartridge I'd see if you could borrow it to compare against yours before shelling out for another. I'd also take another look at the way you are setting the tracking weight as way too little or way too much VTF will have a similar effect as the stylus desperately tries to follow the groove. Finally going back to your original post you say 'the arm has lots of horizontal movement'
. If you mean by this that the horizontal bearing has play then this could be the problem (although the salesman who checked the deck should have spotted this!).