No, the PTO doesn't need to be engaged on a 35 for the hydraulics to work. Looks like your piston rings are leaking pretty good. If you use a small mirror and a light so you can look up, you will probably see fluid running out the end of the cylinder. You are going to have to pull the top cover off to fix that. Also replace all the standpipe O-rings while you're at it, and maybe a new relief valve for good measure.