I have to ask: do you engage the clutch before activating the PTO Lever? You're not talking about the DRAFT/POSITION CONTROL LEVER either, right? Is the system hydraulic oil up and/or is it contaminated with water -murky brown is the clue here. Water gets into the system, freezes in winter, then damages pump when forced to work without thawing. Don't 'guess' for any problem. Perform true root cause problem solving methods, then determine if part is defective and if so, if can be rebuilt,(1st choice) before buying new. Your hydraulic system sounds like it is severely worn out. It is extremely difficult to 'twist' the PTO shaft. It's made of induction hardened steel and would have to take great force to twist. You would damage the implement PTO drive line and gear box long before the shaft. Get out your Essential Manuals. FO-4 and Owner's manuals have chapters on hydraulic repair. Load dropping fast is the big clue your cylinder is worn and leaking, and probably time for a system inspection and rebuild. Did you perform the leak down test via inspection covers? Pulling the top cover is a time consuming job so you only want to do it right the first time. Get cover and, possibly the pump too, on your bench to inspect before buying any new parts. N's used the 1-1/8" splined shaft until the NAA released the 1-3/8" splined shaft. Only the latter is made new today. The NAA also released the newly deigned cylinder piston with rubber O-Ring and leather backup wiper which works much better than the older 3-Steel Ring Piston on all N's. I highly advise to plan on getting a new cylinder (trying to hone or rebore it never works) as well but wait til you know what all parts you will need and buy all at once. If pump base is cracked due to freezing, it is junk. If not, cleaning and rebuilding are in order. Cylinder, piston, O-Ring & Wiper, gasket kit, new oil, safety relief valve, and maybe more will be need. A new PTO shaft is your call if ya wanna go with new. I also have a document I wrote on 8N HYD REPAIR- email me for LINK.
FORD 8N TRACTOR ESSENTIAL OWNER/OPERATOR/PARTS/SERVICE MANUALS: