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Maybe this will help.
I have hopefully attached the Hardin Marine add on steering schematic for the Saginaw valve setup. They talk about that looped tube...

is it real stiff or just kinda stiff ?

Knida stiff at idle / like two hand stiff. After looking at the chart from mudball it looks to be hooked up right may just be a flow problem from the wird fitting / I would guss its 1/8" I.D. or less over a few inches....

based on your pics, it is plumbed correctly. I am gonna have to go with the good ol' replace the cable answer on this one. It is a great excuse to upgrade to full hydrualic though. If you have the money and patience left to deal with it after everything else you have done to that rig.

I have read in many places that 'add on' hydraulic steering systems are 'stiff' at lower rpm's.

I agree. Get a hydraulic helm! You will be happy!

Can the cable be replaced by hydraulic helm and still use the internal ram and original P/S pump?

I'd like to start upgrade of steering without loosing whole boating season and cost of full external hydraulic right now>

Yes, you can use the original powersteering pump. but it will hook directly to the external ram. The internal ram can be removed. It really cleans up the inside of your transome.