Ok so I noticed the throttle adjustment screw has some discoloration on the threads from where it was originally adjusted correctly. I measured the gap with the 1/8" bit and the throttle screw is off by at least 1/8th"!
The shop that rebuilt this made too many rookie mistakes IMO... Makes me suspicious...
Is that thread locker or just paint on those threads?
Threadlocker, they used a locknut on earlier valve bodies. I would go with the first spec I gave you for the regulator, but it is your call. Yes they made a few mistakes.
I really don't understand the difference of the pressure adjustment...
What difference will it make setting the line pressure at 1 1/4" vs 1 9/32? Is it that the tighter the adjustment the more "umph" it will have for shifting?