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If the old housing is letting air in you simply need to renew the seals. Use Viton where you can.

Is this a pressure-timed system? The governor controls engine power by fuel pressure. For these engines, restriction on the return line can cause s runaway so it would make sense that a restricted return would prevent the engine from returning to idle

Whatever you do, don't suck through a secondary filter. The restriction is too high.

The primary filter goes on the suction side of the lift pump, secondary filter goes on the discharge side of the lift pump.

Not to be a negative Nancy but that's a lot of pipe goo on those fittings. Use Loctite 545 or equivalent in the future or better, housings with o-ring boss ports. Copper was not a preferred material for diesel fuel systems due to bad interactions with the sulfur in the fuel. With ULSD I would...