I've not run an mk 17, but I hear they are pretty good engines. It sounds like you are flooding it. Dry out the crankcase and squirt some fuel in the exhaust port with the piston up, covering the exhaust port, and start flipping. Don't put any fuel anywhere else until you get the compression set so it will run a second or two off the head prime. Then attach the fuel line and open the needle valve a half turn. Choke it only until fuel gets to the carburetor, not inside the engine. Then head prime and fire it up. Repeat this, opening the needle a little at a time, until it keeps running. A flooded diesel is almost impossible to start.

Fuel coming out the front end behind the prop happens in some of my diesels. Just a matter of how good the seal is on the crankshaft.