I'm a bit puzzled that you seem to be dialling in filtration on the head AND using an Ilford multigrade filter. I thought this was either/or. What happens if the head is set to no filtration and you just use the Ilford filters?
Sounds to me like there is a whole bunch of flare in your system - most likely between the negative holder and the lens.
How clear does the lens appear to be? It could be a problem with fungus.
Why don't you try contact printing the step wedge directly to the paper and see if the contrast comes back?
Also, if the enlarger's light source is somehow in question, you could probably do the same contact print using room lights, preferably with an incandescent bulb (exposure time is not very critical as the step wedge can accommodate a really wide range). Be sure to lay the contrast filter on top of the glass/step wedge/paper package.
Light leaks from the enlarger: you should see them; if not, they are probably negligible.
1) Did you perform the safelight test?
2) "Printed a step wedge at different filtrations" If, in that test, your wedge is contact-printed onto the paper, you can rule out any lens flare or light leak; you must look for an explanation elsewhere.
3) Buy/borrow/beg different paper and developer.
4) As concerns contrast when actually performing an enlargement, make sure areas outside the image are effectively blocked. "As im doing 16mm at 8x10 (...) Bit more info - i only have 6x6 mixing box" I'm not familiar with that mixing box; does it have an adjustable mask? If not, try to hack a crude mask out of carboard.
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