There is a zero point in the valve = with reaching the zero point the valve closes and nothing goes to the pressure accumulators. The Pentosin coming from the power steering pump enters the regulating valve thru the inlet connection and discharges again thru the outlet connection of the regulating valve and is conveyed thru the piping system back into the reservoir. Because of the minimum pressure regulating valve the system pressure after the regulating valve cannot go below p = 30 bar. The overpressure valve limits the maximum pressure and opens at p = 130 bar.

The drawing http://www.bilder-speicher.de/08042314847711.gratis-foto-hosting-page.html
of the regulating valve shows:

1: Drehschieber/lever shaft
2: Hebel/lever
3: Ruecklauf/return line
4: Vorlauf/in-line
5: zum Verteiler/to distributor
6: Druckablassschraube/pressure release/bleeding valve
7: Absteckbohrung/adjusting hole !!!!!!!
This adjusting hole is very important to find zero position


QUESTION 1:
The two screw-ins with two holes - the bigger of the two tightens to a stop, but the small one I can continue tightening and compressing the spring - when do I know when to stop?

Answer: small one on my one seems also tightened. Maybe the gasket is slightly to thick? But I do not have the right tool, so I cannot open it, just checked with a screw driver. But I found some yellow paint on the screw-in and the housing, maybe that is just a checling /seal to confirm that it is tightened.

QUESTION 2:
Of the THREE little balls, there are THREE different sizes. I hope I put them back in right. According to the picture in link above, it goes from left to right the Biggest to the Smallest. Was that right?

Answer: I guess you answered by yourselves already. As I cannot open it, no clear answer from me. I am waiting for an answer from the German E34 board, maybe someone there has the answer. Check this thread, use google translate. If you cannot open the pics there, just register there and you have all rights to open the files. I posted there the link to your pics. There is one guy who is expert in hydraulics, I hope he reads the thread and answers
http://forum.e34.de/thread.php?threadid=103929&threadview=0&hilight=barmag&hilightuser=0&page=1



QUESTION 3:
How do I know how to position the lever on the rod?

Answer: Go back to top of my answer. Item 7 is the point. Zero point
"7: Absteckbohrung/adjusting hole !!!!!!!
This adjusting hole is very important to find zero position"
7 is the pinhole in the lever AND the housing.
http://www.bilder-speicher.de/08042314847711.gratis-foto-hosting-page.html
Then you have to find the position that it goes in and out of 3 and 4 (see pic) but not to the back to the bombs respectively to the distributor pipe.
Maybe the pics on the German E34 board helps. Or the German 7-Forum, where I have collected all drawings and pics available on the net including yours
http://www.7-forum.com/forum/24/komponenten-niveauregulierung-edc-deren-lage-84467.html
Maybe this one too
http://www.e38.org/e32/EDC%20german.pdf


QUESTION 4:
Should I be cleaning the rust off and re-painting the housing?

a: already discussed, no need actually, just use a steel brush, maybe copper. But if you want, use a coating spray.

QUESTION 5:
After reassembling Hex screw, how free-spinning should the lever-and-rod be? It seems to tighten up quite a bit.

I checked my spare one, of course that is from 1988, so 20 years in use, that goers pretty free. I assume that when there are all new O-rings, it will be much tighter. Anyway, the lever is strong and that should be no problem to move it.
Adjusting the lever is described here in German and English, with pics. See the one pic, the bolts of the clamp must be on top =towards the car chassis
http://kunden.tridem.de/auto/erich/niveau/niveau.htm

E32 750iL 11/88, E32 750iL Highline 03/90
7 series Tech tips http://tinyurl.com/3486c

• LAD Regulator Valve Repair Questions (url) - buffbuh 2008-06-06 04:29:04 (119 views)
  • The Three Balls in Regulating Valve - buffbuh 2008-06-24 11:47:18 (18 views)
  • very nice pics, Bryan, thank you very much - shogun 2008-06-06 10:15:42 (38 views)
    • Thanks, Shogun. If any HTML experts out there ... - buffbuh 2008-06-06 12:12:55 (35 views)
      • Diff is S315V225 - Bentley says 1.9L/2.0qts BMW Synth (nt) - buffbuh 2008-06-06 12:38:07 (25 views)
        • some answers, Bryan - shogun 2008-06-06 22:56:38 (38 views)
          • some numbers and guide (pic) - hairywithit 2008-06-08 09:56:36 (106 views)
            • the third ball, Jeff Chia's pics (url) - shogun 2008-06-08 10:19:33 (36 views)
              • 3rd Ball and arm position (pic) - JeffChia 2008-06-09 22:33:03 (81 views)
                • 3rd Ball -- thanks for the update - hairywithit 2008-06-09 23:59:28 (28 views)
                  • Lever setting - JeffChia 2008-06-10 13:57:44 (31 views)