Mike, the pulley shaft should not be that loose. At least not an inch or greater coming out of the pump casing. Donnie knows these parts much better than I, but I would say, that by your description, something inside the pump is broken or a retainer nut has come loose. I would try and locate a used pump. I have no idea where you could get parts for this. Also, it seems apparent that there is some internal damage.
1987 BMW 325