I've run into this quite a few times and have seen it plenty. I replace the diaphragm, install handle kit and a new vacuum breaker kit... put it back together and water dribbles from under the vacuum breaker nut... can anyone tell me what causes this or what to look for? I don' think it's the v/b or gasket leaking... looks to me that it is coming from the holes below the nut flange.
Those holes are an integral part of the anti-siphon, back-flow prevention system.
If it's assembled properly they shouldn't dribble any water.
If you research the history of the Sloan valve, before the holes and vacuum breaker were added to the design around the turn of the last century many people were poisoned, got sick and died from several incidents traced back to cross-contamination from unprotected Sloan flushometer valves.
It is really disturbing to me that a Google or Bing on the subject pulls up a near complete blank.
I found something about an outbreak of foot and mouth disease in the middle of a 3 mg pdf file, but the original incident which I believe happened in Chicago about 1910 or 1920 is proving difficult to find.
Of course the official Sloan site fails to mention it.
I learned about it years ago in a continuing education class on the history of Flushometer valves.
I was going to post a link to the incident, but it seems to have somehow either been removed from public records on the Internet or efficiently buried under the multitude of popular "hits" a search retrieves that are advertisements, product info and commercialism.
How interesting.
Sloan is still marketing products in 2009 that can cause cross-contamination's of the kind that are more of a nuisance and not of a life threatening nature.
Their automatic faucets are wide open to hot and cold lines running to a mixing valve below a single solenoid valve.
Some units have a two solenoid design, but can still cross over while operating.
Without the "optional" $40 apiece check valves for the stops, there is nothing to stop the cold lines greater pressure from filling an entire building's hot lines with cold water.
Don't get me wrong here, I'm not implying Sloan is the only company making these things.
Chicago, Bradley, AirTrol...are a few others I ran into at the hospital I worked at.
Almost all the designs for automatic faucets will cross connect without check valves.
Back to the vacuum breaker dribble....
I worked in a hospital as a maintenance plumber once upon a time.
I've rebuilt hundreds of these Sloan valves and I ran into a few that were a real pain just like you have described.
All new parts installed and it still dribbles water out those holes.
Sometimes I wondered if it may be the age of the rubber.
Just because you open a new kit and install it, that doesn't mean it hasn't sat on a shelf somewhere for a few years and dried out.
Still I never walked away from a toilet until I got it to stop dripping, even if I wasn't exactly sure what I did to get it to finally quit.
Hate when that happens.
My best guess is the problem comes from that little paper gasket that goes on top the vacuum breaker.
Take it loose and re-tighten it being very careful to make sure the paper slip gasket stays in place while turning the nut.
That seems to make all the difference.
The thick rubber on the upper end of the vacuum breaker has to make a good seal with the bottom end of the Sloan valve and that won't happen if the paper gasket doesn't slide and let it keep the proper shape while you're turning the nut.
Make sure the bottom of the valve is clean from calcium build up and corrosion, any uneven surfaces.
Try a little Teflon pipe dope to help the sliding process if all else fails.
Another thing you may want to do on a rebuild is always replace that o-ring on the slip joint and grease the new one.
Many times they are dried out, flat, and after replacing the diaphragm, inner lid, vacuum breaker, and handle kit... you have turned the valve enough to get the vacuum breaker out and the o-ring wont re-seal no matter what you do.
Better to just make that part of the standard rebuild and save all the hassle.
Good luck, and if anyone can find that story on the contamination caused from early Sloan valves without vacuum breakers and post it, I'd be interested in reading it again.
Thanks.