You are on the right track, and very close to making a Cycle Stop Valve equivalent. You really only need to by-pass a certain amount of flow around your pressure reducing valve. A tee before and after the PRV, connected by a 1/4" pipe which includes a 1/4" ball valve is all you need. The pressure relief valve you described will not work.
Set the PRV to 70 PSI, with the pressure switch set at 55/75. Then crack open the 1/4" ball valve to allow about 1 GPM to by-pass the regulator. This will work exactly like a Cycle Stop Valve. You can also just drill a hole through the body of the PRV, usually in the bridge wall below the valve closure. In this way you do not need the bypass tee connections and ball valve.
This has been tried for decades and is also the way the very first Cycle Stop Valves were built. Many companies are now making valves this way to try and compete with the Cycle Stop Valve.
The problem arises from the small size of the bypass. A drilled hole would need to be no larger than 1/16 of an inch in size. The 1/4" ball valve would also need to be barely cracked open to make a 1/16" opening. The small 1/16" hole is very similar to the size of a single hole in the shower head. Just as the holes in your shower head will usually become smaller and then clog from hard water deposits building up, so will this 1/16" size hole. Water coming through this 1/16" opening is responsible for the cooling of the pump. When this 1/16" hole becomes clogged, the pump will overheat and be destroyed.
Making the hole larger is how many companies try to keep it from clogging up. The larger the hole, the higher the minimum flow through the valve. When the minimum flow through this hole is greater than the amount of water being used, the pump will cycle on and off. In other words, if you make the hole large enough to allow 3 GPM minimum flow, anytime you are using a 2.5 GPM shower, the pump will cycle on and off, and the shower will see the pressure change from 55 to 75, which is what caused the problem with the instant water heater to start with.
The Cycle Stop Valve solves this problem by not using a drilled hole or bypass line. The Cycle Stop Valve uses a half moon notch across the valve seat. The size, shape, and placement of this notch has been engineered to eliminate clogging, velocity wear, noise, and valve seat chatter. Anytime the valve opens, the half moon notch is flushed of debris and hard water deposits, which eliminates any chance of burning up the pump. This simple change of design is what makes the Cycle Stop Valve dependable compared to other types of valves.
I know freight and customs is the biggest issue but, we send Cycle Stop Valves all over the world. We have customers in the Phillippines, New Zealand, Australia, England, South America, Canada, Virgin Islands, Trinidad, and many other places. You can try to make your own, or you can get the benefit of our many years of experience by using a REAL Cycle Stop Valve.