Sorry, the numbers on the cylinder don't mean anything to me. I think it is a dump cylinder out of an underground haul truck like a Toro or Jarvis-Clark. Here is a link to your control valve though:
http://www.sterling-hydraulics.com/files/pdf/g0457.pdfLooks like you have your valve plumbed up right. Pump to port 2, Tank to Port 4, Cyl ports to port 1 and 3.
The problem must be one of the following:
1. There may be a velocity fuse valve in the base cap port on the cylinder, if you look in the port is there any kind of poppet in there. These are used on scissor lifts to keep them from dropping if a hose breaks.
2. The retract oil volume is to high for the valve, flow forces are shifting the spool to close. This usually causes chatter though. The retract flow of oil can be calculated if you know the flow from your pump, the diameter of the cylinder barrel, the diameter of the first stage.
3. There is a design flaw with this cylinder and as the first stage is fully retracted, the piston is blocking the path of the oil flow for the other stages to escape through the port.
4. The cylinder was rebuilt and someone left a rag in the barrell (it' sounds funny but I've seen it happen, i've also found a grinding disc in a barrell once)
As for testing the cylinder, the smaller stages extend while the large stage power retracts do to back pressure at the extend port. When the first stage is retracting, there is a whole lot more oil coming out of the cylinder than there is going in (difference in displacement due to the stage diameter).
While the cylinder was stalled out in power retract and the smaller stages where creeping out, this is also due to back pressure at the extend port. The back pressure in this case is from oil flow from their relief valve across the return filter. I didn't hear a piston pump compensating, so it is either a gear pump and relief they are using, or it could be a piston pump, but they were using a relief valve to adjust pressure and not an adjustable compensator, as you would hear the pump destroking. If the largest stage was fully retracted and left to stall out, the power extend line blocked, and the stages creeping out, that will be due to bypass on the first stage piston seal. This piston seal is often just one or more cast iron rings.