I love a mystery but this one seems to be unsolved. But don't give up. Before somebody says anything, I'll say the shift switch looks a bit wonky with that white wire instead of blue. And yes, newer models had five wires, two of them white, for neutral start protection. But if it is shifting correctly, let's not worry about that.
Back to the original problem, I don't know what to say. It should work. Let's do a bit of troubleshooting and disconnect the diode from the key switch. Will it turn off now? If everything else is right it should turn off, but the prop won't immediately shift to neutral when you run the starter. That is the purpose of the diode---to provide voltage to the shift switch before the motor is running. We all learned this stuff from OMC, back in "The Day"
If it still won't turn off with the diode disconnected, the wiring must be goofed up somewhere else. The purple wires must be getting voltage from some other source than the key switch. Possibly incorrect connections at the terminal strip on the motor. I suppose it could be the key switch itself, but not very likely. More likely, a bad key switch would result in not running at all. Got a voltmeter?
EDIT: Um, I think I got it. Make sure the "monkey nutz" diode at the motor terminal strip is connected Purple/green to Purple/green, and NOT Purple/green to Purple. There should be only the two purple/green wires under the one screw. Refer to the diagram I posted.
