Well, I's just finished another round Pin #3 Testing, this time I was armed with instructions for depressing button #2 (California Vehicle)
1) key off = 0%
2) key on, engine off = 14.9%
3) engine on
Well, initially it was roaming between 30 & 38% and I was unable to gain control. I tested the voltage across the O2 connection and found that it was exactly 0.5V. So, recalling Stevebfl's instructions, I disconnected the O2 sensor and ran the car at 2-3K RPMs for a while, in order to see if the O2 sensor was foul. After doing this a few times, I was able to adjust lambda. It is now 48 - 52% at idle and less than 5% off of this at 2K RPM's.
My remaining question is what is the correct lambda setting for my California 1989 260e? Again, it is currently set at 48-52%, but I've seen other discussions saying that it should be at 45%. Does anyone have the recommended setting information?