So I was never thrilled with the solution I posted above, adding a spring to the brake pedal to lift it back up. This only really serves to pull the break pedal arm off the master cylinder push-rod...it doesn't solve the actual problem that the master cylinder has some amount of pressure applied from the hydroboost diaphragm. After watching this video, and seeing some other comments from THIS thread and THIS post from canuck1, I think my issue is how my hydroboost was originally plumbed. In my setup I was bringing the hydroboost and power steering returns into a Y-adapter before the oil cooler. In this setup, if the power steering return pressure is higher than the hydroboost return, it will put a back pressure on the HB return line, which prevents the brakes from fully releasing.

The ideal fix is to have 2 separate returns on the reservoir, and route the power steering return and HP return independently. I have the KRS PS reservoir which only has a single 6AN return port. So, for my setup I opted to re-route the houses and simply shift my return hose intersect to the other side of the oil cooler. This means the pressure from the PS return has to go through the oil cooler first, where it will hopefully experience a pressure loss, before merging with the HB return line. My hope is that by the time they merge, the pressure differential will be less than how I had it plumbed originally and it won't put any back pressure on the HB line.

RESULT: So far it looks like it has worked...when I let off the brake pedal, now the pedal lifts off immediately and the brake lights turn off instantly. So there doesn't appear to be any brakes applied after letting off the pedal. I'll monitor this closely as I start to go kart.

To fix my setup, I had to buy some new adapters - outlined in the diagram below (UPDATED):


I'm still using a 180° fitting between my PS low pressure return and the 10AN oil cooler input line, so needed a reducer adapter there. This has been secured with a zip tie so it isn't flopping around inside the engine bay.


Then I bought a new T-adapter for the merge near the reservoir return port. I still had to use a 10AN to 6AN reducer for the oil cooler (PS) return hose going into the T-adapter. The HB return is coming in from the right side, routed under the Coyote air intake.



All this is detailed in my video below, followed by some pictures and updated diagram.
https://youtube.com/shorts/u22ZOwq5Zs0