The procedure you posted makes no sense to me.
Install the pinion as described in the procedure, but ignore the whole torque procedure for the nut.
Tighten the nut until you achieve the bearing preload noted in the procedure. I assume since you set up your rear differential you understand what is involved in measuring rotating torque of the pinion. Personally I would shoot for 15 in lbs. Every other differential Ive ever build had a spec of 10-15 in lbs for new bearings, so 25 seems to me to be a lot.
Once you achieve the proper preload, you are done. Leave the nut alone and definitely do not back it off and re-torque. If you overtightened the bearings, the easiest way will require you to get a new crush sleeve and start over. (also have a look at the races and make sure that when you overtightened it didnt leave indentations-been there, done that)
The actual amount of torque required to crush the sleeve is completely irrelevant. That number is what it is. It will easily be more than 160 ft lbs. The important part is you applied enough torque to the nut to crush the sleeve to get the proper bearing preload.
Using a torque multiplier helps this process as you can do much finer adjustments and "sneak up" on the bearing preload. As you probably know once you start getting preload on the bearings it takes very little movement of the nut to make a big difference.
If you install a crush sleeve eliminator kit, then the torque on the nut becomes relevant. It is a nice upgrade, but if you do the install correctly, the crush sleeve performs just fine.