1. When the water is running there is water leaking from behind the packing nut

When the C-434/534 Hydrant is turned into the "off" position, the water in the valve will drain out behind the packing nut. If water leaks from behind the packing nut during operation, the O-Ring or U-Cup bypass has been damaged and needs to be replaced.

To determine which of the two styles you have, the stem needs to be removed from the valve to identify the bypass type.  The bypass will be on the stem, near the handle end.

Current Style-O-Ring

Old Style-U-Cup