If all the dips are due to you peeking, 1, peek less & 2, manually activate lid open mode before you peek.
The PID control needs time & data to cancel out the natural fluctuations of the system. Garbage in, garbage out. You're causing the PID to react to what it thinks is a natural fluctuation, but it's not, so you get big bounces. lid open mode tells the PID to relax & not add air since you've added air by opening the lid.
If you're peeking often, you'll go nuts trying to tune your PID settings. Stock should be close. I usually start 30-50* below desired cook temp, then increase once it hits the 'peak' of overshoot. You then have a closer to stable system to let the PID catch up (or rather, let the fire catch up to the PID).
From the HM wiki:
There's an explanation of what changing each parameter will do to your pit.
https://github.com/CapnBry/HeaterMeter/wiki/PID-Tuning
For this advice, keep in mind I have trouble running at 225* because the fan lets in too much air naturally...I need a servo. I have a servo and a 3D printer, just haven't re-wired my 4.0 to use it or built a 4.2 (got all the components except the PCB). Most of the time I BBQ at 275 w/fan or 225-230* w/o fan (HM just monitors)
I would:
1. mount fan, close all other vents. seal if necessary.
2. light fire
3. keep fan unplugged from HM, but put the pit probe in.
4. see where it settles down to. hopefully a little less than what you intend to cook at. let it get as steady as possible. No peeking
5. Plug fan in & set to cook temp. You might need to modify the min/max fan settings here - min = as low as the fan will run, max=probably close the the 25% you have now.
6 leave it alone for an hour. No peeking.
7. see if graph is holding steady or at least getting steadier - the PID might take a while to work. You can show which PID terms are affecting the output on the graph, but I can't remember how to turn it on w/o a keyboard (look in config).
8 if you have more fluctuation than w/o the HM fan, reset your B/P/I/D to stock & read the link above. Trial & error until you're happy. Or too drunk, then try again tomorrow.
Remember, when empty you will have faster response than if you have food in there, so don't slow it down too much to get a pretty, smooth graph to show off on the internets. You'll have a really long cook the next time.....you could stick a fire brick or heavy pan in to slow it down a bit.
My guess is that your P is low, your D is high & B needs to go away. But that could be way off if you have air leaks or something else.
The defaults in 20140630B and above are: (Posted August 2014)
B = 0
P = 4
I = 0.02
D = 5