I have a potentiometer for the volume control in my electric guitar. My multimeter reads 485K ohms on a 500K pot putting my test leads on each outside lug, which is fine I believe. When I put a test lead on the wiper and one on an outside lug my multimeter just says 1 as I turn the knob and also switch to different ohm ranges on my meter. What does this mean?
It probably indicates "overrange" on your meter. Presumably the most significant (leftmost) "1" comes on when the meter leads are disconnected (on ohms ranges) as on the below typical Asian multimeter.
It would appear to mean that the pot is faulty, since the resistance from the wiper to either end should vary from about 500K to a few ohms depending on the shaft position.
Here's what the pot looks like inside (viewed from the back, as is your pictorial diagram). When it's set to minimum resistance (clockwise from the front) A is shorted to W. When it's turned all the way counterclockwise from the front pin B (shield) is shorted to W the way your amplifier is wired.