No, you can not run them while they are diluting the oil. The diesel fuel will thin the oil and it won't lubricate the pump properly.
I'm pretty sure all you need to do is get the lift pump rebuilt for that problem. When I did mine it cost $100 said and done. That was 7 years ago so it is probably twice that now.
Call the guy in Iowa and ask him prices on rebuilding the lift pump and the big pump. I wouldn't be too excited to overpay for that SMD with a known problem like that. It would certainly be a barter point.
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Today's Featured Article - An Old-Time Tractor Demonstration - by Kim Pratt. Sam was born in rural Kansas in 1926. His dad was a hard-working farmer and the children worked hard everyday to help ends meet. In the rural area he grew up in, the highlight of the week was Saturday when many people took a break from their work to go to town. It was on one such Saturday in the early 1940's when Sam was 16 years old that he ended up in Dennison, Kansas to watch a demonstration of a new tractor being put on by a local dealer. It was an Allis-Chalmers tractor dealership,
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