That is not that bad but it still needs addressed.
It is either the result of the seal being removed and reinstalled when the reg was not pressurized or depending on when it was serviced last, the diaphragm leaking a bit. If you remove and replace the cap and seal with it pressurized, turn the tank off and purge the reg. It should suck down slightly. When you turn it on again it should come up to level or hair more.
If it bulges like that, the seal needs replaced and a possible rebuild because it's stressed beyond where it was designed to be and you may be getting some air past the diaphragm. Which is not normal.
I wrote the 1st draft of the service procedure for the D3 and D2. I've serviced well over a hundred of them and trained over 50 people to service their own HOG regs before I retired. I know this reg inside and out.
"On the ambient pressure [elevation] note... could this be caused by the reg being assembled/sealed in a chilly environment and the internal air volume expanding that much when reg left in warm sun? Or does the reg always look like this, regardless?"
No, there is not enough air in there to bulge like this. Sitting in the sun should not affect it.
It is either the result of the seal being removed and reinstalled when the reg was not pressurized or depending on when it was serviced last, the diaphragm leaking a bit. If you remove and replace the cap and seal with it pressurized, turn the tank off and purge the reg. It should suck down slightly. When you turn it on again it should come up to level or hair more.
If it bulges like that, the seal needs replaced and a possible rebuild because it's stressed beyond where it was designed to be and you may be getting some air past the diaphragm. Which is not normal.
I wrote the 1st draft of the service procedure for the D3 and D2. I've serviced well over a hundred of them and trained over 50 people to service their own HOG regs before I retired. I know this reg inside and out.
"On the ambient pressure [elevation] note... could this be caused by the reg being assembled/sealed in a chilly environment and the internal air volume expanding that much when reg left in warm sun? Or does the reg always look like this, regardless?"
No, there is not enough air in there to bulge like this. Sitting in the sun should not affect it.