Incorrect Fuel Pressure

Isn't it supposed to be like that? Pressure in the FPR depends on manifold air pressure. If there's vacuum in the plenum, the pressure is lower. If you unplug it, atmosphere pressure becomes the reference. Have you checked the FSM for FPR troubleshooting?

I checked the FPR and it seems to be working correctly. It jumps up about 10 PSI when I remove that vacuum hose like it should. The problem now is when I start the car the fuel pressure drops from 35ish PSI (before cranking) to 25ish PSI (with car running). Any ideas what is causing this?

Before cranking you have atmosphere pressure in the plenum, when idling, you have vacuum there.

Fuel pressure of course will drop as soon as you crank or start the engine. This is so because the injectors are releasing pressurized fuel into the ports. When fuel escapes from the fuel line before the FPR, it is only natural that the fuel pressure drops. It is like you have been drinking a lot of water. Pressure builds up in your bladder. When you ease your pressurized bladder, pressure in your bladder naturally drops.
It works on the same principle.
Fuel pressure is constant at 35 PSI when you have the ignition ON (without cranking) is because pressurized fuel is not going anywhere ( assuming 1/2 is being returned to the tank). The other 1/2 is held constant which is pressurized. Once when there is a puncture, fuel escapes. Hence pressure drops although your pump might be constantly pumping fuel as the circuit is open at one end as opposed to a completely closed circuit. There is nothing wrong with your fuel supply.