If the parachute is a military drogue, I can assume that it has a lot of shroud lines. How are you packing it?
Don't get too liberal with the gunpowder because 1gram is more than enough for the 4 X 10 1/2 space you mentioned.
Next, when ground testing the deployment, make sure the aft end of the rocket is sealed just as it would be in actual flight. In other words, if the pressure created by the ejection charge is escaping through the aft end of the rocket there certainly won't be enough to push the parachute out. Try wrapping the motor casing with just enough masking tape to make a snug fit (not a friction fit) between its outer diameter and the inside diameter of the motor mount tube for a better seal.