You shouldn't be able to roll it thru compression, that's an indication of low compression.
As for the starter lugging a little on compression that's normal for a clone engine.
The starters are not nearly as powerful as the OEM Yanmar starters, actually they are quite weak and an engine in good mechanical condition frequently will not make it over the first compression stroke if the engine stops close to the compression event. Typically you may need to bump the starter a couple times get the engine rocking before it will follow thru.
Does the puff have a diesel smell if so yes the injector is firing but the puff coming out the intake is not normal the valves need attention.
The either smell is a sign the owner tried to compensate for mechanical issues to get it started.
My first move would be to remove the head and check the valves then the piston/cylinder.
And let your observations be your guide.
These engines are not difficult to R&R, it would be a good learning project. Parts are not that expensive and are available on ebay.
Last year I repaired one of these gensets because it was running poorly.
Valves were leaking and cylinder glazed. Cut new valve seats, honed & replaced rings and she ran fine.
90Cummins