Dang. I ordered that Holley regulator and thought it would be okay. Nothing I saw in the description gave me warning. Maybe I missed it ? The instructions in the box state just what you wrote: Not for use with mechanical pumps.
I'll look at the one in that link you listed. Thank you.

Is the hose from the sending unit to the steel line sucking shut?

I didn't look for that. I will though, good suggestion and thank you.

I ordered, received and installed this regulator yesterday.
I mounted it to the right frame rail by the pump. The outlet of the pump enters the regulator then exits to a new steel line that runs back up to the filter and dual feed line to the carburetor. I thought of mounting it behind the carburetor but this looks cleaner and is mostly out of sight. I also ran the return line to the stock vent line. The fuel temps did go down.
Primary Carburetor bowl Before: 135+ After; 127-130
Fuel line from regulator to filter Before: 160-165. After: 145-148.
Odd thing though: The Carter pump I also installed used to register an 11 lb reading before. This regulator is supposed to be preset to 6.5 lbs. It now idles at 3 lbs but jumps to 6 or so when the engine revs up. I tried adjusting the locknut as per the instructions but it made zero difference to the pressure reading. Their tech line is closed on weekends, of course.
The filter never emptied out though. It almost always did before. The pressure never dropped to zero like it did before.
I thought that I may have the regulator plumbed backwards. The instruction sheet is very basic, the regulator is not marked INLET or OUTLET, nor does it have arrows to indicate the intended direction of fuel flow.
If nothing else, it does not run dry. That is an improvement.

the opening opposite of the adjuster is the return .

3 psi at idle is fine, to raise the idle pressure you have to change the jet to a smaller one.

I do have it plumbed the way you wrote. The instructions did state that, they just didn't state which end was an inlet. Maybe the unit is designed to be used either way?

It does not matter in or out, also mounted down low & that far from the carb the idle pressure will have a slight drop . mine is mounted next to the carb to get rid of as much hot fuel as possible,,, it gets hot in south Texas!!

Hmmm...I mounted mine down low thinking that the plumbing would be simpler and that it might run cooler down there. It did drop the temps in the fuel line by almost 20 degrees. I still do not know at what temp that ethanol laced gas boils.

You should be ok, here is mine, the regulator is wrapped next to the ac compressor.