I will explain exactly what is going on.
What you saw:
main level:
##### # - walls, -+- - waterwheels, P = pump, . - channel
#| |#
##+P+##
|P|
.
basement level:
design 1
#####
#7#7#
#7#7#
#7#7#
##7##
###
but here's what it looks like to the water:
#####
#777#
#######
|P|
.
#####
#7#7#
#7#7#
#7#7#
##7##
###
It can't pass through the middle tile of the water wheels or the rear tile of the pump.
Now the thing about diagonals is that water won't teleport through them, the thing we call pressure. The pump looks for the lowest and closest space connected to its backside an teleports water from that spot down and in front of it to that spot connected to behind it. So as water falls through that diagonal it creates a very brief spot to put water and the pump lifts water out of that one tile and puts it in the spot the water fell out of.
So the problem with your design is that you've gone and given the pump a spot to put the water, namely:
#####
#777#
#######
|P|X <- HERE!!!
.
Side view:
Normal
#7#_
#777#
Modified
#7#_766655655
#7777#
*the floor tile would also have water on it but I wanted it to be clear where the water was coming from
And to be absolutely thorough here is a water-perspective.
Start in tile the pump draws from
Get taken by pump
Go to back of pump if it is not full.
If it is full at tiles left, right, or up from that: up is a wall; left and right are water.
Check tiles next to those. All of them are walls but there is a water space on the z level below.
Check tiles next to that. Only down is water.
Check tiles next to that. Up is where we came from and down is water again.
That's all of the tiles it normally looks at for the pump. Once the water is in the last tile I mentioned it is free to fall onto the input tile and "falling" into that diagonal is what makes the water wheels move. Pressure and actually moving water are different things for this reason. If you dug out the two tiles next to the diagonal and then walled the whole thing in so that it couldn't overflow it also wouldn't ever spin the water wheels. The water would just teleport past them.