I have a custom made HSS tool from a piece of regular 10mm2. I have been careful to make sure the tool height is correct. It is a radius tool so there is not a sharp point to it yet when it comes into contact with the steel, the steel eats it away like it is made of plastic.
I'm sure I am doing something very basic here but I just can't see what is wrong.
Three possibilities: Your tool is not HSS, your work is not mild steel, or the cutting speed is way too high.
This would only make for a rough finish, but I don't see any side clearance on the tool. Check out the reference section on my website for proper clearance angles.