From your description of needle swings, my first guess would be regulator sticking open. I notice you replaced the diaphram, which is good, but it is possible there is gunk on the valve seat in the regulator. Taking it apart and cleaning may solve the problem. The parts you need to check are behind the brass adjustment screw. Be aware there are some very small parts in there.

Also be sure your prop is tight and you are not using a plastic spinner backplate. A slightly slipping prop can cause a needle chasing exersize... been there done that.