Re: 2004 996 PSE mod problem
I also have a 2004 996 C4S with factory PSE (i.e., the car came with PSE from the factory), and I too removed the relay that causes the PSE to cut-out around 30-45 mph. As a result of removing the relay, the PSE--if in "on" mode--is on the entire time and there is no cut-out. This relay is under the dash around the fuse box area. I can't remember exactly how a friend and I removed it. But your concern is correct: removal of the relay should not affect the on-off button on the dash; in other words, you should be able to turn off the PSE whenever you want. I don't remember cutting any diode, though.
I don't have the specific answer as to what you should do. But I would check the renntech board and search its archives. If that doesn't have your answer, then post your question over there. You're bound to get an answer.
Good luck.