also you need to give a rundown on the exact parts that are being used in this engine. you say it's a 1/2" PU and that it's spaced off the pan far enough. not being a smarta$$ but what did you do to make certain of this? iirc milodon PUs have a raised strip to make sure it's off the pan but moroso's don't

it still sounds like a problem on the suction side of the pump