you should never overwater a cactus. they can live without water, but they can't live with too much water.
imho, it's water shortage. don't water it for a few days and keep that peyote in one place, don't move it around!!! this is very important. keep it in the same place, with indirect sunlight. if it starts to go yellow, move it a bit more into the sunlight, but NEVER, i repeat...NEVER put a peyote that you don't know where it's been into direct sunlight. check your humidity levels (from my calculations, they love it at 60-70% rh) and your temperature (between 20-30ºC) and everything should be OK. direct sunlight can burn them, and so moving them around at your will. stress can kill a plant like goran hsrak said once, and he is absolutely right. moving them around creates stress, and as you may know, there's no psychologist for them yet. keep them in one place.
if i were you, i wouldn't water them for a week, and see if the wrikles go away. if they don't, water them from below (do you know how to do this?). the wrinkles should dissapear in 1 or 2 days (don't know if a grafted cactus will respond the same way). if they don't dissapear, it is not a water problem, it is something that possibly went wrong. maybe the grafting was badly done, maybe the cactus has disease or something, i don't know, i can only speculate.
i hope this helps...