David,
I don't have a DD-103 or KWM-2 myself but I can suggest a few checks. First, make absolutely sure there is no T/R shift with the counter entirely disconnected. The "Vietnam" mod amongst others is specifically designed to fix a well-known KWM-2 T/R shift due mainly, as I recall, to PTO voltage regulation issues.
Second, check the shift with various stages of attachment and powering up, starting with just the DD-103 power on/off, then PTO (VFO) attached or not. Finally, you could try a high impedance connection to the counter via proximity pickup as suggested in the manual. There are various KWM-2 fixes to align T/R frequencies but if it's the counter causing the issue, I'd fix that problem first.
I'm still looking at whether to add a display to my S-line twins but, as I think I mentioned before, I prefer a system that counts all three oscillators (PTO, HFO, BFO).
73, Peter.