It will take a bit of time for the pressure to drop from the 40 PSI (or 65 PSI now) back whatever the set value is (after you backed it off).
Just let the CO2 flow for a little while, and you should see it decrease.
I would just let your regulator off gas first (with the CO2 main cylinder closed). This will reset everything back to zero (make sure that the regulator knob is still dialed in (clockwise) so that any gas remaining in the regulator can be released. Of course, you could just unscrew the regulator from the CO2 cylinder as well...)
In any case, once that is done, just make sure your CO2 knob is completely backed off (counter clockwise) and your needle valve is open.
Open the CO2 main cylinder valve. The high pressure gauge should read the CO2 cylinder pressure.
Slowly turn the regulator knob clockwise until you reach the desired delivery pressure, and then adjust the flow further with the needle valve.
That's all there is to it.