@BenF
I think you reasoning is that there might be a hidden maximum current that is independent of power ratings that is doing the damage.
If this were a semiconductor then this could be true, but this is a passive linear component and will operate at 0.5W with a variate of currents and voltages. This device is overheating therefore it must be experiencing a power dissipation over it's rating. With a 5V supply the only way to do this is to connect between the wiper and one end. I blew up two pots like this when I was 12, I have never forgotten that lesson.
I think this is a problem of either misidentifying the wiper or having some mechanical fault with the soft pot.