Most likely the transfer pump, but you probably shouldn't worry too much about it. I have a machine that has very similar symptoms and stayed that way for years (mainly because I was too lazy to work on it since it started ok). The pump does have a bypass valve assembly at the bottom. Remove the cover at the bottom. A spring and plunger will drop down. Make sure the plunger doesn't have trash that could be keeping the bypass open. You can also stretch the spring some, to give more pressure on the bypass, so that it takes more pressure to bypass.
I guess you took the fuel line loose at the pump and let fuel drain into a can to make sure you have good flow to the pump? If you are sure that flow to the pump is good, then tinker with the bypass and see if lengthening the spring helps any. It is a bit of a PITA getting the bypass back in place. Just hard to work under there if the pump is still on the machine.
One of my D2's had very low pressure and it was just a worn out pump. I tried all the bypass 'fixes' to no avail, so finally I took the pump apart and I resurfaced the outer plate, taking out some scratches. This gave the pump better pressure. Also replaced the two seals while it was off (the seals that keep fuel out of the injector housing). Cat still sells the seals. It still has kind of low pressure while starting, needled bounces around, but pegs in OK area once running.
The machine should still start even though your pump dial shows low pressure. With all my machines, the fuel gauge stays in the green once the machine starts, even though the dial is not in the OK range while starting. These old things will run even when things aren't at 100%.