The HM allows a LOT of flexibility in the setup, with a blower and damper there's a few ways to go about it...
The easiest way to hit and maintain a low and slow target temp is to let the servo damper and blower work in tandem, both working the full range of output, with the top vent open only a crack. (just past the dimples on an Akorn). This will give you a forced air stoking scenario with the top vent and damper clamping down hard on air flow when the pit hits the target temp. This setup is the most forgiving of PID settings, however, you still need to have the PID tuned reasonably well or you could get the over stoke and choke response if the PID settings are too slow to respond.
Press the "P" key while the HM web page is selected and the PID info dialog will pop up which can give you some incite on where your PID settings might be too aggressive or too laid back. You can set the PID so the response is laid back and only reacting after the setpoint has been achieved, or you can set it so it is more aggressive where it starts to react as the temp approaches the setpoint.... It looks like you want the PID set so it starts to react before the target is achieved, in which case the HM will start to slow the fan and close the damper earlier which will reduce the overshoot, then as the temp starts to fall it will open up the damper and start the fan before the temp dips below the setpoint which will prevent the choking.
The other more difficult way to control the pit is with the setup you have been attempting to dial in, using the fan for stoking and the damper only for the cook. This is my preferred method because I feel it gives a better cook with less air flow to dry out the food and less stale smoke trapped in the pit. However, in this scenario it will be much more sensitive to the PID and top vent settings and you must be much more attentive to the way you build the fire. Using this method you generally need to clamp down on the top vent (to the dimples) while the fire is first stoking, then after the target temp is achieved and starts approaching the setpoint you should open the top vent up a bit to allow convection air flow to do it's thing. In this scenario you need to make sure to light only a very small fire because the larger the fire the more convection air flow which can continue to stoke the fire during overshoot. When you are first trying to figure all this stuff out a little cheater trick you can use to prevent the "stoke and choke" is to pop the lid open briefly after the temp starts to fall toward the target temp after the initial overshoot. In your initial test run it looks like the fire built up too large initially then was choked out too small before the HM kicked back in. This situation can be eliminated with PID tuning, but until you figure that out popping the lid as noted above will provide some oxygen to the fire to prevent it from choking and release some heat from the pit and kick the HM into action to stoke the pit back to the setpoint. The HM will eventually regulate the fire to the appropriate size to maintain your target, the more accurate your PID settings are and the more appropriate size fire you light initially the faster the HM will get things under control. Once things are rolling along at the target temp (in damper only mode) you want to adjust the top vent so the HM is holding the servo damper open about 30% so it has plenty of room to stoke or reduce the fire and compensate for grease and wood chunk flare-ups etc. You wont need a large load of lump coal to do a low and slow cook with damper only control, limiting the amount of coals you put in and how many of them you light is a good way to get started out with the right size fire. It only takes a tiny fire to heat an insulated kamado up to low and slow temp and maintain it, if you get too many coals burning you will get more initial overshoot and have more overshoot issues each time you open the lid.
Sorry for being long winded, but I hope some of what I said is helpful to you.
