The dense nature and high sugar content of sweet potatoes can make them difficult to turn into crisp crunchy chips without burning, even when you ARE frying them. This is the reason so often sweet potato fries are soft rather than crisp.
I have never tried baking them into chips but your method seems to be very sound. Any higher temp is going to burn them even more quickly and a lower one is going to just turn them to mush by the time you cook them longer to try crisping them.
Here's a slightly adjusted method: Try slicing them closer to 1/16th of an inch and then place them between two pieces of greased foil or parchment paper. Preheat two baking sheets in the oven for about 15 minutes so that they're hot when the sheet of potatoes goes onto it. Put the sandwiched sheet of potatoes on the first hot pan and place the second one on top to "press" them so that they're essentially "oven frying" between the sheets of paper/foil. This still may not work as the steam will be trapped but pressing them between two preheated pans may help.
My primary suggestion: Fry them and don't eat the whole batch. OR Fry AND eat the whole batch and don't do it too often.
Many times it's just best to do things the traditional way and enjoy it, than to try substituting and having a less than ideal result.
It sounds to me like the issue may be that you're crowding the pan.
Basically, to get everything nice and brown and crispy, you need enough space for all of the steam to escape. That picture you showed has potatoes stacked on top of each other -- that means as the bottom items cook, they're going to end up steaming the items above them.
At a diner, they have a large griddle to work with -- they can really spread things out. You're not typically that lucky in a regular kitchen, as you don't have as much space, and you have a lip on the pans that'll hold the steam in.
So, either work in smaller batches, or consider recipes that use an oven -- using sheet pans instead of a pan on the stove solves much of the problem.
One other trick is that most diners don't start from raw potatoes -- maybe with hash browns, but not for home fries, you're not going to get the nice soft interior in a reasonable amount of time unless you start with a potato that's already been baked or boiled. (If you're doing things in the oven, you might be able to, but not in a pan)
Just for reference ... I have a 14" cast iron skillet that I use for home fries ... and it's about the right size for cooking a single large potato, which might be two servings, maybe three for kids. (I tend to cook carb-heavy meals).
update : I probably should've stated this directly -- you want the chunks of potato to form a single layer in the pan, with space in between them.
Best Answer
Thickness is important and there are different strategies for dealing with different thicknesses. But if you're having a problem getting them dry and crisp in the center before the exterior browns too much, there are a few standard suggestions. In order of complexity/extra work:
For more details on the last two tips, see this article at Serious Eats (which contains photos of the results).