Large pressure drops are indicative of flow restrictions in the air lines. I don't see the M-23 listed. If it's smaller than the M-30 it's probably not big enough. Long runs of small hose can also cause that. If the pressure maintains while you are cutting it should be ok, but it's not great. You might want to think about upsizing your air system a little bit. The more restrictions you put in the line, the larger everything needs to be. There is pressure and CFM, pressure can be turned up, but to get more cfm requires larger lines for the same pressure. Does your torch have the little ball tube to measure flow?
Someone else will have to give you tips on the best pressure to use with the PP50 and what you can do to cut down on dross.
Long arc, short arc, heliarc and in-the-dark!