My Watts LF263A won't hold pressure - What's wrong?

Loss of pressure can be caused by a piece of debris, calcium scaling or defects in the metal seat or rubber head of the valve.   In figure 1, you can see that there is a small hole for the rod and a bigger hole where the rubber head of the valve seats.  Figure 2 shows the parts that are in the lower half of the regulator.  You can access this area by removing the nut directly opposite of the adjustment bolt.

Fig1                          Fig 2

Anything that prevents the rubber head from seating can cause the regulator to fail.   Cleaning the seat with sequentially aggressive methods usually can clean it and resolve the issue.  The order of methods, all of which may work are 

1 - Using a lint free cloth soaked in white vinegar or CLR on the end of a pencil

2 - Using emery paper on the end of the pencil

3 - Using a dremel tool and a 45-60 degree cone and grinding the seat until smooth.  If you use this option, it is best to be able to look at the seat under a microscope to identify the problem.  In the photo below, the customer was able to correct this issue by using a 60 deg dremel cone bit to shine up the surface and make the regulator like new!