Sedayne -

The comment on pegs wasn't meant to imply that properly fitted pegs aren't good for wire strings. Many of the "homebuilt" or "craft built" early dulcimers appear to have had a straight hole bored with an auger, whittled out with a pocket knife to give it some arbitrary taper, and then an oversize straight peg rammed in and then spun until things "sorta matched up." With pegs of that sort, low tension is best.

Matched hole reamers and peg shavers to provide well-fitted pegs have been around for quite some time, but even now a good set is pretty pricey, and not something you'd want to buy to build one - or even a few - instrument(s).

As to your nylon string experiment:

A dulcimer doesn't have a bridge, and when you fret a string a little bit of the noise gets out of the string at the nut end, but most of what goes into the soundbox goes through the fret that the string is pushed against. A nylon string, of the kind used on other modern instruments, might have been just too "squishy" to wiggle the fret, especially with a fat finger on top of it.

I don't have any good engineering data on old gut strings of the kind one might have made at home out in the smokehouse, but modern "gut" fiddle strings seem to have an astonishingly high surface "hardness" that would not be replicated in modern nylon strings. Given even that though, it's still a SWAG about what might have caused your silent dulcie.

John