There's nothing wrong with using the covering to correct twist, I use that method for truing every wing I build. And it holds too, especially with MonoKote which has a higher tensile strength than other coverings.

Sounds like you're doing everything right but it can take several cycles to finally get it straight. I've taken more than 3 degrees of twist out of the wing of a Super Kaos 60 this way.

But personally I wouldn't include any washout. A Kaos wing should have absolutely no twist.

Dave