Getting graphite inside the hub is a problem. This would work the graphite into the surface of the wheel hub. This is simpler but slightly less effective than undercutting the inside of the hub. Chuck an axle in a drill motor and have on hand a small file. The undercut should be in the center of the wheel bearing area.
Some judgment is required.
This would not be good. If the undercut is too narrow, it lessens the benefit. When the undercut is complete, polish the axle carefully. Make sure that there are no burrs left from the undercut. Filing several test axles might be a good way to start.