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Its possible that the engine is seized. When you had the starter off did you try turning the engine with a screwdriver or pry bar?
If you remove the starter and apply power to it does the bendix come all the way out then? Were there any shims on the old starter that did not get removed and put on the new starter?
I think an inspection of the bearings in the engine is needed. It sounds like you probably have some bad bearings. When it will turn does it make any squeaking or tapping noises?
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