So what "is" a 25 yd. benched PCP group SUPPOSED to look like?

From my experience shooting at 25 only tells you what ISN’T working. . 50 yard groups tell you what MIGHT be and when you can shoot at 100 hopefully it will tell you what IS

So my answer is if you are testing at 25 yards in good conditions and shooting off a rock solid rest and assuming NO shooter errors ( right??) you should be expecting very small groups one hole or close 

MOA is the gold standard which we shoot for so that’s at inch at 100 or .25 at 25. And I’d expect that or better.

so at 25 the group radius is only 1/8 inch larger the your 25 cal pellets. 

I don't ever shoot to group at 25 yards. If I did, it'd be one hole groups, that's why I take mine out to 50 and beyond.

Zonk 

To me it's about consistency. How many tight groups I can get in a row.

Like 26 five shot groups in a row with my Thomas on one fill with 13.4 gr .177 at 28 yds.

25 yards for me on a dead calm day better be one single hole or either keep tuning or keep practicing ( practicing usually for me)

As far as a break in period for any regulator, I wouldn’t be too upset at all with what you did there. Any reg takes awhile to settle in. 

At 25 yards anyone who has a hope of being in top 10 needs literally hole in hole accuracy at 25. You didn’t mention sorting by size, weight, obvious misshapen pellets tossed. 

I’ve said this before but I personally find trying to hit a long distance object easier than doing one hole groups from my rice filled jean legs. I’m also in preference of a super fine reticle on just enough magnification for me to see my POA. If I use anything over 10x my brain overcompensates for what it’s seeing. I do much better on lowest setting I can use & just being able to see POA. Maybe because I was trained on open sights. 

I only see 33.95 MKII’s @ 880 fps listed from unknown twist 700mm liner. I’m sure you know some barrels prefer something most say theirs doesn’t like. If you’re not happy, try something else. Seems most anything likes the 18.13-25.43 Kings weight range. Lubing could help also. 

Well here you go, witnessed 25 shot group from a 12FPE .177 Daystate Redwolf with premium select JSB 8.44 pellets, rested using an ACCUTAC bipod and rear bag at 25 yards.

Those are all great groups...