Sounds like the unloader valve you're talking about is stuck in the open position as a result of mineral deposits built up over time,its fairly common.

You would be best to clean it and then put the grease on it afterwards.

Did you follow these instructions when you removed it earlier ?

http://www.ereplacementparts.com/article/7045/How_to_Replace_the_Spill_Valve_on_a_Karcher_Pressure_Washer.html

I believe those are directions for a karcher 2000 I have the 3300 and it has a different style pump

Did you try greasing the valve ?