Pic #1 - That does appear to be the relief valve. As Whirly suggested, it is usually on the same end as the levers, but some are on the back end as that is, and on a rare occasion, can also be found on top of the valve body.
Pic #2 - Hoo boy! Leave well enough alone for now. Accept the fact that 225-250 lb is the lifting capability. More on this later.
Pic #3 - I agree with Whirly.
Pic #4 - Yes, it will work, BUT, turning the tractor to the right is likely to rub the tire on the pump. Clearances need to be determined at extreme right turn angle with the front axle fully tilted both left and right. Again, as Whirly suggests, a stronger pump mount would be a wise investment. Unlike Whirly's pump which has to handle a maximum of about 4 hp, and the one on my GT that has to handle about 6 hp, you're pump will only need to handle about 2 hp. None of the pumps need to handle their respective maximum power for more than a very few seconds at a time.
While a 5000 psi gauge is handy to have for checking pressures in an unknown hydraulic system, you won't find that pressure on any GT. The pump will break before the pressure gets that high. The 3500 psi gauge at PAL is more than adequate for this purpose, and once the system is dialed in, a gauge slightly less than double the relief pressure is ideal.
Back to the arms . . . and lift cylinders. The lift cylinders are 1" diameter X 10" stroke? At 1000 psi, that's a lifting force of 785 lb each. They are working on the wrong end of about a 6.5:1 lever ratio for an effective lifting force of about 120 lb each at the center of the bucket, or 240 lb payload. The geometry of the set up will further reduce that payload, as will the weight of the arms and bucket to some extent.
As Whirly stated, the arms should be 2x2 structural tubing, not for lifting strength, but for lateral strength. A side load on the bucket either from hitting something while turning, or turning the tractor with the bucket engaged with the ground, will put a substantial side load on the arms that 1" of metal is not going tolerate for too many repetitions. With the 4' lever from the post to the bucket, you would be able to bend the arms by pushing the bucket sideways with your hands if it wasn't for the crossmember supporting the bucket curl cylinder.
Reinforcing the arms with angle between A and B is not going to help at all for lateral loads, and is unnecessary for vertical loads. There are lots of manufactured loaders with 2x2 arms that have lift capacities of 400-500 lb with longer arms.
This brings us to the wall thickness of tubing where Whirly and I are in some disagreement. A wall thickness of 1/8" is common for all GT loaders. With the loads usually involved, that is adequate due to the length of the arms and the bending that will result. Heavier wall tubing will support more load before taking a permanent bend, but it will still bend. Arms made with 2x4x1/8" tube will support more weight than arms made with 2x2x1/4" tube, and will be 25% lighter. That lighter weight translates into a few more pounds of payload when needed, and less load in the front axle when it is not.
As Whirly also suggests, diagonal bracing from near the top of the posts down to the front of the tractor frame should be in place. While the torque load at the bottom of the posts with a capacity payload is relatively light in this case (about 500 ft-lb per post), improving the payload capability will increase that torque load to the point of failure for the tractor frame or the cross member supporting the posts. Without the diagonal bracing on my GT's loader, the torque load is about 650 ft-lb per post with no payload. Without the proper support structure, a capacity payload would be a real bad idea. And guess what . . . there are many Sears tractors similar to yours out there with the same basic loader as on my GT! They just don't have the same support structure.
Whirly also has a good point about the upset loads on the cylinder pins because they have only one end supported, especially if payload capacity is increased.
As with everything, gauges come in different qualities, usually with a price tag that reflects that fact. PAL's gauges are adequate for our purposes, and you aren't likely to find a better price than $11.23 anywhere. I paid $15.99 for a 2000 psi gauge on sale at PAL last December.