Power Query Distinct non repeating Index

List.Generate should work quite rapidly:

let
  Source = #table(
    type table [Item = text, dex = Int64.Type],
    {
      {"A", 1},
      {"B", 2},
      {"C", 3},
      {"C", 4},
      {"C", 5},
      {"D", 6},
      {"D", 7},
      {"E", 8},
      {"A", 9},
      {"B", 10}
    }),

//Sort by Item
    #"Sorted Rows" = Table.Sort(Source,{{"Item", Order.Ascending}}),

//Add the N column using List.Generate
  #"Add N" = 
      Table.FromColumns(
        Table.ToColumns(#"Sorted Rows")
        & {[i=#"Sorted Rows"[Item],
              b=List.Generate(
                  ()=>[a=1, idx=0],
                  each [idx]<List.Count(i),
                  each [idx=[idx]+1, 
                        a=if i{idx} = i{idx-1} 
                          then null 
                          else List.Count(List.Distinct(List.Range(i,0,idx+1)))],
                  each [a]
              )][b]},
        type table[Item=text, dex=Int64.Type, N=Int64.Type]),

//Sort back to original order using the dex column
    #"Sorted Rows1" = Table.Sort(#"Add N",{{"dex", Order.Ascending}})
in
    #"Sorted Rows1"

This groups and adds an index, but then combines as columns which results in getting N just once per group. No idea how this performs vs other solutions provided - test on your data and let us know!

let
  Source = #table(
    type table [Item = text, dex = Int64.Type],
    {
      {"A", 1},{"B", 2},{"C", 3},{"C", 4},{"C", 5},
      {"D", 6},{"D", 7},{"E", 8},{"A", 9},{"B", 10}
    }
  ),
    Group = Table.Group(Source, {"Item"}, {{"rows", Table.ToColumns, type {list} }}),
    Index = Table.AddIndexColumn(Group, "N", 1, 1, Int64.Type),
    IndexToCol = Table.TransformColumns(Index,{{"N", each {{_}} , type {{Int64.Type}}}}),
    CombineCols = Table.CombineColumns( 
      IndexToCol, {"rows","N"}, 
      each Table.FromColumns( 
        List.Combine( _ ), 
        type table Type.ForRecord( 
          Type.RecordFields( Type.TableRow( Value.Type( Source ) ) ) 
          & [N=[Type=Int64.Type,Optional=false]], false 
        ) 
      ), 
      "new_tables" 
    ),
    CombineTables = Table.Combine( CombineCols[new_tables] )
in
    CombineTables

Output

just List.Generate

let
  Source = #table(
    {"Item", "dex"},
    {{"A", 1},{"B", 2},{"C", 3},{"C", 4},{"C", 5}, {"D", 6},{"D", 7},{"E", 8},{"A", 9},{"B", 10}}
  ),
  all_items = List.Buffer(Source[Item]),
  distinct_items = List.Distinct(all_items),
  gnr = List.Generate(
    () => [i = 0, contains = true, s = List.RemoveItems(distinct_items, {all_items{0}}), c = 1],
    (x) => x[i] < List.Count(all_items),
    (x) => [
      i = x[i] + 1, 
      contains = List.Contains(x[s], all_items{i}),
      s = if contains then List.RemoveItems(x[s], {all_items{i}}) else x[s],
      c = if contains then x[c] + 1 else x[c]
    ],
    (x) => if x[contains] then x[c] else null
  ),
  n = Table.FromColumns(Table.ToColumns(Source) & {gnr}, Table.ColumnNames(Source) & {"N"})
in
  n