I thought I would give an update on this. I have a customer who works up loads for people. He has been working on a Peregrine recently, but he hadn't cleaned it yet. When I asked him about any leaking issues, he went to pull the breech plug to check. He installed his using only grease like White Eagle did. However, it was all he could do to remove it, but he did get it out, and of course, it was fouled just as bad as mine was.
I did ask Steve Brian about all this, and the washer is meant to stay locked into the receiver. When I asked how one would remove it if they wanted to, he said to make a hook with a piece of wire and pull it out. However, this doesn't work because the washer diameter expands to the point that it is below flush with the barrel, so there is nothing to catch the hook on. It makes me wonder if Knight has even tried to remove one after a few dozen shots.
Anyway, I didn't try to remove the washer anymore. Instead I re-installed the breech plug but this time I really cranked on it when installing (not what the owners manual says to do). I tightened it as tight as I could with a short ratchet so as to not overdo it. I shot 16 more shots. The leaking was still there. But significantly reduced. I am still concerned about flame cutting and/or head space issues over time, especially with no good way to replace the washer.
I guess time will tell.