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I would say from the fact that with the loader removed the system worked good and did not over heat or chatter
that it is most likely the valve. As was previously mentioned either the spools or the closed center plug is not working or the relief valve is dumping oil.
So to start with just pull the return line off the valve or the tractor, if you take it off the tractor you can wire it so it goes in a bucket.
Start the tractor and see how much oil comes out the return.
 
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