MH81 brings up a good topic and is one I just dealt with myself. When your engine is turning over or just starting the hp. available is just about zero. If you can't get it to start, try disconnecting the drive shaft and alternator and see if it will run then. Just put a different alternator on a Lister-Petter diesel. It would start and then slow down and quit. Wasn't until I noticed the amp meter was at full deflection that it dawned on me that the alternator was stalling the engine. Pulled one wire and it started and ran fine.
So it could be your hydro, alternator or other load that is not allowing it to start. Your engine is only rated at 12 hp. at full throttle. A hydro can consume 2 hp. and the alternator the same or more. You might think your starter is turning over fast enough but in truth it is not. Even if the hydro control is a little out of adjustment and not in neutral it can put enough of a load on that small diesel to make starting undoable.
Let us know what you find out.