Without being there to see it, it is tough to tell. The regulator is obviously not working properly. My best guess is that the plunger pin is not seated completely into the plunger so that the diaphragm is pushing the plunger open even at rest. Everything you have posted suggests that the plunger is not seating and letting too much fuel by. My best guess is that something is in the hole in the plunger that is stopping the pin from fully seating into the plunger. Let us know what YS finds. It will help the next guy.

Blessings, Terry