Always flushing after steaming milk is a very good idea. You could also get hold of one of those Palio steam wand cleaners if you're worried that it really is very contaminated.

As for what you're seeing on the pressure gauge and the temperature you are measuring, both readings may may not be accurate (the pressure gauge is not really a precision instrument and the container you are pulling the water into when measuring the temperature could be absorbing heat etc.).

Rather than going by the numbers, you could try experimenting with what gives you the best experience.

Most users settle on a setting (so to speak) on the basis of their preferred beans and the temperature that gets the balance they prefer from their shots and the how they tend to use the machine in terms of speed of heat-up, number of shots likely to be pulled in a "session" and so on. Bright beans will prefer a higher setting as a rule. Making changes of say 1/4 turn at first and getting a feel for things before changing the setting again you will eventually find what works best for you. On my machine, which I mainly use for Ethiopian and Yemeni beans, this is a pressurestat cycle over slightly above 0.7 (on) to 0.9 bar (off), but that is only what the gauge is showing. That said, many users seem to settle on something similar, so I don't imagine the variations from one gauge to another are that great.

Cheers

Mike