First question. When you say tires spin are both tires spinning? From those tires if both are spinning then the tractor has power.
A 40hp machine should be able to pick up 1/2 yard of sand in a pile with the correct technique. A 40hp machine will most likely not fill the bucket if you are trying to ram into mother earth with it.
I am not sure what exactly you are describing as sand in your hillside. If you cannot walk without considerable effort (as the sand is sliding out under your feet), then it is not a bank of sand on your hillside. Likewise if you can grab a handful, squeeze it and any (and I mean any) of it compresses into a ball it is not sand.
I am starting to think it is a combination of something other then sand and a lack of technique. Are you curling the bucket at all or just stabbing it into mother earth straight forward and expecting a full bucket? Have you tried back bladeing the hill to loosen it up then try to bucket it up?
As far as being had, the only one fooling anyone is you. You went and purchased a 50 year old machine without even testing it out before purchase? Granted it sound like you have no clue in regards to the operation of the machine and that is fine, but you could of at least asked the previous owner to demonstrate.
You have there about $600 in scrape iron. $1900 for a machine that runs and drives and quite possibly works with a 1/2 yard bucket is a bargain in my eyes given your application.
Here is an easy test. Put the bucket all the way down and see if it will lift the machine at all. If it does then go find someone to show you how to use it properly.
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