Is there enough friction on the tyre? That is, perhaps as the bicycle wheel speeds up, the dynamo wheel looses its grip. Setting the dynamo closer to the tyre might help. Also, ideally you need need a dynamo strip on your tyre for added friction potential. Not every tyre has one.
I have never trusted to a single wire + earth circuit. I've always used a twin wire. You have to be sure that the earth equivalent takes the same route as the actual earth (connecting one wire to the mounting brackets at each end and the other to the connectors at each end), or you land up with a short-circuit, but it's worth it in the end. There again, that doesn't sound like the problem here.
