BDR-
That is a nice looking installation, but you are correct that you are not installed in the ideal location. It would also be helpful to describe the rest of your set-up (i. e. electric/mechanical pressure gauge, snubber, isolator, etc. ). I would suggest that you move your pressure line to the bottom of the fuel filter. I use Ray's tapped banjo bolt for this. This location is still the outlet of the fuel filter so you are measuring the proper pressure of the VP44 but you have distanced yourself from it. Did you leave the stock rubber hose between the fuel filter and VP44? This hose, because it is flexible, offers some dampening of the water hammer effect that you are seeing on the guage. Addtionally, you will want a snubber inline or a rubber hose to your sender (I use a grease gun hose). The steel braided hoses are nice, but there is no flex to them so the pulsations are still passed through to your sender (also be aware that these pulses are very hard on the electric senders). If you want to stay with your braided lines, make sure that you install an inline snubber of some kind. I have seen them on this site and basically are a mechanical device that have a very small pin hole to pass the pressure changes. Your valve might actually work in itself if you tighten it to the nearly closed position. Good luck,
David