OK, here's the symptoms...
extremely high oil pressure readings when cold (about 120psi) and still high when up to temp (about 90psi) while driving. I know the gauge and sender are working because the oil PSI will vary with engine RPM (about 30 PSI).

Engine details...
2.0 carbed w/ hydraulic lifters, Royal Purple 10/40 and Mobil 1 filter.

I assume the problem lies in the oil pressure regulators? Any other ideas before I begin surgery?

So, here are the questions...
1) Do I need to drain the oil before I remove the pressure regulators?
2) Do I need to remove both regulator assemblies (Haynes reference; 15.4 & 15.5 page 29) and if so what do I replace?
3) On page 20, section 6 of the Haynes manual point #2 says "oil goes to a cooler which again has a bypass valve" - Is there another valve actually in the cooler?

Extra bonus question for hydraulic lifter experts...
On the later bus cases I remember hearing that they eliminated the pressure valve on the right side of the block? My understanding was to provide greater oil flow to the lifters. Is this true and if so do I actually need that valve in place or did I completely get that wrong?

Are you running a stock, or aftermarket oil pump? Could it be that your sender does not match the gauge? The top of the sender will tell you the pressure range that your gauge should have.

It's the same sender and gauge that has always been in the car and always read correctly. According to the local buggy shop here when the senders go bad they usually go wide open. You don't continue to get pressure readings.

is it a vdo dual sender? they come in both 80 and 150 psi senders... and they dont interchange.....

relief valves CAN get stuck... thus giving you more oil pressure, or less oil pressure depending on where it gets stuck.

the filter mount also has a bypass in it... which bypasses the filter if the psi is too high (and thus not filtering most of your oil if you truly have 90 psi)

cooler does NOT have a check valve in it.

pull the 2 relief pistons and make sure they arent stuck-
you will need a 1" wide 'drag link' socket to get the big one out, and then use a 3/8 socket EXTENSION (square end) for the 12 point plug.

I have the correct sender and am using the correct gauge. So aside from having to pull both pistons how do I get to the one in the filter mount?

thats not your problem. thats so it doesnt blow the filter up at startup.
if you want to see that one... unscrew your oil filter its that ball bearing with a spring behind it....

Thanks Aaron. Just cause I gotta ask...what happens if I run the car without the relief valves in place?

I had trouble with the drag link socket. My socket blade was straight, but the slot is crescent shaped, and the socket couldn't get enouth grip at the end. So I made the tool in the pic. Piece of strapping, ground to curve, then sharpened enough to fit into the slot in the bolt. I pressed it into the slot with one hand, and grapped it with pliers at 90 degrees.

Click to view attachment

Regarding the hydro lifters- I also have them. I have heard about the pressure regulator being removed to increase the oil flow to the heads, but I'm skeptical. For the following reasons-

1. It was removed on the 914 sometime in 1976, 2 years before the VW went hydro in the type 2.

2. It's set to open at about 48 psi. That could be upwards of 4000-4500 rpm. So in a hydro bus, what's the point?

I am convinced, however, that the bane of hydro lifters is lack of oil flow to the rocker box. I was checking the adjustment on mine, using a cut open rocker cover, and when I set the lash to +.006", there was quite a bit of oil coming to the rockers. Even with the half valve cover, my driveway will never be the same. When I went to -.006", it shut the flow down like turning a valve into its seat. When I thought back to when I had removed the covers to do the job, I remembered that the rocker box was QUITE dry. A bit of oil-wetness and that was it.

Then I googled "valve failure" and found the following article.

http://www.prime-mover.org/Engines/Marvel/tbo3.html

I read it from time to time, and learn something every time. Lot's of similarities- flat 4, air cooled, the manufacturer's first attempt at hydraulic lifters, late 70's timeframe..... The article even explores sodium vs. stainless valve pros and cons!

So I've spend a lot of this past winter improving the oil flow to the rockers, and I've learnt a couple of tricks that you can do- with the engine in the car no less! PM me if you're interested....

Jim - You've been PM'd.

OK, got the one off the bottom of the engine. Is there supposed to be an "O" ring in the groove on the piston?

No O ring. Looks like you have one of the higher pressure piston

Replace the piston with a stock unit and the issues will be solved...