did I set the pinion bearing preload too tight?

Go with the reading once it settles. Sounds like you've got it pretty good to me.

After the proper bearing shim and bearing are pressed onto the pinion, place the new crush sleeve on the assembly. Place the front bearing and oil slinger into the housing. Apply a thin coat of RTV to the pinion seal and install (the bearing and slinger will NOT fit through seal after installation! The diff case bearing race makes a good seal installer.). Install the pinion assembly, crush sleeve, flange and new nut, using anti-seize on the threads and splines. Now comes the muscle part (or brains, if you have air tools)! Retain the flange with the tool used during removal (angle or ?), and the tighten the nut until the flange contacts the crush sleeve. The minimum torque to collapse the crush sleeve is 140 ft-lbs; it will take quite a bit of horsepower to get this sucker to collapse! Wiggle the pinion assembly as you tighten the nut to get an idea of how much more you need to collapse sleeve. When you feel very little play, sneak up on the tightening (watch a reference mark on the socket; stop at 1/16" to 1/8" linear movement along the circumference) and check the bearing pre-load torque often to get 16-29 in-lbs (new) or 8-14 (old) (new bearings have higher torque than old; once ran, they will loosen up slightly). DO NOT exceed the pre-load torque, and DO NOT back the nut off to reduce torque (this keeps the bearings loaded). If you exceed the torque, you'll have to get new crush sleeve and try again. Just take your time and sneak up on it...