Setting Up HVLP gun

G'day Guys, as you're about to witness I have absolutely NO idea about spraying so bear with me here :(

I have a Harbor Freight HVLP gun I bought on a trip to the US, model 43430. It comes with a regulator that I can set to 50 psi as per instructions. The problem is once I open the air volume on the gun it affects the pressure at the regulator. I have a good sized compressor and even with 100 psi in line to the gun I would have to have the regulator set way over 50 psi to maintain 50 psi with the air volume control open a reasonable amount.

I tried pulling the regulator apart and it looks fine (it was a bit stiff at first) though of course I'm no expert in regulators. I have to conclude #1 idiot here is doing something wrong. Any hints, clues, or general abuse coming my way that could help me out? Incidentally, I'm trying to spray some Carbothane clear finish but it's not laying down very well and it's clearly the setup of the gun that's the problem.

Cheers,
Pete

PS I tried another regulator since posting and the pressure drop when I pull the trigger seems much less. Unfortunately the regulator isn't the type I'be be happy to have swinging off the bottom of the gun as it's actually a fixed reg/oiler, unused so no oil in it and awaiting install.