I have a situation where a 5mm steel rod needs to be in contact and rolls over segments of a 80mm steel pipe's inner face. Would it be a good idea to loosely slip a Teflon bushing over the rod and use it as a roller? I haven't seen loose fitted bushings, so I'm not sure if it'd be right to let a bushing rotate like that.
This is fine in principal, there are a few applications where a similar arrangement is used, in fact it is common for nylon wheeled castors to just have a plain bore.
In this situation the bushing will tend to travel along the rod as it rotates unless it is constrained so you will need something to locate it axially.