I would follow JPG's recommendation on the start capacitor. Out of all the Model 10E, 10ER, Mark 5/V and Mark 2 Shopsmith's I have restored, including those waiting to be restored, I have yet to have a bad start capacitor. That includes 2 original, very early A. O. Smith 1/2 HP motors (shown below) on my Model 10E first production tools which are now over 76 years old.
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Although not a problem, one of the confusing parts in this topic is now going between the Model 10ER and the Mark 5. I believe Kevin's comment about staying with a 1/2 HP motor refers to the Model 10ER. Mark 5/V's started with a 3/4 HP motor going to the 1-1/8 HP motor in the early 1960's.
Something I noticed in the picture of your Model 10ER is the flexible shaft and how it is attached to the spindle. :confused:
It is not how the Shopsmith/Magna Flexible Shaft attaches. I also have a flexible shaft made by another manufacturer which goes directly on a 1/2" shaft which can be used on a Shopsmith using the Flexible Shaft Adapter. That is one of two interesting things I saw in that picture. The other is the use of the knob instead of a set screw for holding the Motor Mount Bracket in the Headstock. That knob is probably missing from its original spot on the Model 10ER.