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Update! I just finished installing a new OEM Bosch "Made in the Czech Repubic" fuel pump. It has taken care of the problem with the fuel pressure dropping into the mid 30's psi range. It now only goes as low as 48 psi. I still have spikes going as high as 80 psi.
Yes sir! I installed the regulated return and deleted the fuel bowl and this solved the problem.
So, I swapped out the new fuel pump for the old one just for the sake of gaining some knowledge and the regulated return prevented the fuel spikes into the 80's psi range. However, the plunges into the mid to high 30's psi range returned. So, I swapped them again and everything is perfect again.
When I removed the old fuel pump the second time, I drained the suction side as much as possible and lots of small pieces of brown and black residue came out of it. I don't know if this is just from contaminated fuel or if it is from the impeller (assuming this pump uses an impeller).
So, at the end of the day, I believe that it was both the pump dying a slow death and the regulator on the fuel bowl needing to be replaced/rebuilt.
Many "BIG" thank yous to all of you who contributed to this thread, for helping to increase my knowledge and subsequently resolving the issue.
Yes, it is a nice kit. Installation on an e99 is a bit more difficult than they let on due to the turbo...about an hours worth of grinding for the drivers side rear.
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