Hi John,
Ok your engine having a 1/2" bore x 3/4" stroke means: -
cylinder volume to be filled with steam = 0.1472625 cu.ins.
since you have 2 double acting cylinders this requires: -
4x 0.1472625 cu. ins per rev.
at 500 rpm this would mean 294.525 cu. ins steam per minute.
In1 hr this would be 17671.5 cu. ins steam required.
At 35.4psi 1 cu. ins of water will produce 514.5 cu.ins of steam.
So: - 17671.5/514.5 = 34.3469 cu. ins water per hour required to be converted to steam.
1pnt of water = 34.677 cu.ins.
so you need to convert 34.3469/34.677 = 0.99048 pints of water to steam.
1 ltr of water = 1.76 pints and you only need to convert 0.99048 pints (or approx 56% of your used water).
The remaining 44% being lost/wasted in some manner.
At the relatively low pressure of 35psi it is entirely possible that a large proportion of this loss is due to Condensing, especially if your pipe runs are long-ish and/or unlagged.
Unloaded running can also be a contributory factor since there will be little resistance within the cylinder, possibly causing a pressure drop... which will result in considerably more condensate being formed within the engine than when it is loaded.
Is your exhaust steam very wet?
If you repeat your test at the same pressure and rpm but with the engine driving a prop in water (try the bath tub when swmbo is not around

) then you may well find that your water consumption is a little lower... there will always be some loss... however... 44% is quite a lot... 15% - 20% would be more acceptable.
Hope this is of some help.
Best regards.
AlexC