How to Install a TransGo TF-3 Manual Valve Body Kit in a A-904

Yes, that's how it works. basically when you push on the KD lever, you are depressing the throttle valve in and boosting the line pressure in the trans. Checking out the line pressure test procedure in the factory manual will show you how much of a change this makes to the PSI reading when you push on the lever. I think you will find about a 50 PSI increase in line pressure when you fully depress the lever. So if your making 90 PSI line pressure at 1000 Rpm and then push the lever in all the way, it will go up to around 140 PSI. So if your adjusting max line pressure via the blue spring you installed, then it should be done with the KD lever in it's full on position.
The reason for this is because as you press the gas pedal down ( connected to the KD lever), the trans figures it's under more load so it raises the line pressure this way to prevent the bands and clutch packs breaking away.
Keep in mind that there will be a minimum line pressure that the TF3 will want to operate smoothly at. You may have to set the KD lever to about 1/3 in as your base adjustment and then use the cable to pull it on to full adjustment. trial and error will sort it out.