Same problem -- figured it out (I think)
Hi,
I had exactly the same problem with my kohler valve and pressure regulator. It was dripping dripping dripping. Went to the plumbing store (crest supply in san carlos ca) and got a new pair ($75 for both--the pressure regulator and the "black cap").
When I put the new valve and regulatory in, everything seemed fine. Turned on the water, adjusted the rite-temp to make sure I don't get scalded. Thought I was done.
Then about 20 minutes later when I flushed a toilet in the house, the shower suddenly went on and it had a high pitched whining sound. And I couldn't shut off the water anymore on the shower!!!
I read the instructions again and I think I figured out the problem: I put the (white) spacers between the body and the "black cap" (as the instructions seem to imply). After I removed the white spacers and re-installed, then it is working perfectly! I think the reason is that the whole contraption works by making sure the black cap is squeezed enough in against the pressure regulator. If not, then water can "squeeze" through some of the o-rings (especially in the black cap). It's actually pretty weird design!!! It's all based on friction, it looks like.
Hope that helps.
ps: Don't forget to put the steel plate on the "black cap" so the screws don't go directly against the plastic. I wish the instructions were in color (instead of black and white) so I could tell this! If you look carefully at the drawing, the steel plate is drawn in there but not mentioned!