Hi edbddaniel,
Welcome to the Ask an Expert forums. It looks like you have some very interesting ideas. From your diagram, It appears you have a closed system with no inflow or outflow of water. Is that right? This resembles certain designs that have been proposed as "perpetual motion machines". As intriguing as those are, they do not work. There has to be some input of energy from an external source (rather than the generator itself) to overcome the energy losses such as friction of the water against the sides of the container, and friction in other moving parts.
It is possible to use a closed flow system to generate energy if there is some external source of heat to drive the flow. Here is an example:
http://www.yourownpower.com/Power/#How%20it%20Works
Looking forward to hearing more about your project,
Chris