Erik;

From your description, it sounds like the solenoid is getting energized (indicated by the dimming dashlights and dropping voltage), but either the solenoid is not pulling in OR the sol is pulling but the high current contacts have a problem, and are not closing, supplying the starter with power...

Sil is on the right track, but if the solenoid work after whacking it, one still doesn't know if it was a problem with the windings or the high current contacts...to determine which is the case, I would recommend shorting the(small) solenoid control wire to the bat terminal to energize it...you should get an audible click and the starter turning over the engine, if you get the click, but little else, keep the control wire energized, and use another test wire to momentarily connect from the bat terminal to the big output terminal (with the wire going down into the smotor)...it the stare moves...then the high current contacts are the problem...

Good Hunting