Upon reading this thread, several things come to mind, in no particular order:
1) The OP never mentioned barrel length. However, his velocities might still be reasonable for a 16"-18", maybe even 20" barrel. Otherwise, they're much too slow.
2) You mentioned both "closing up the gap", which usually means seating bullets longer to me, and reducing the seating depth. I'm a little confused as to what you actually did. Can you clarify exactly what you did to the seating depth in terms of starting/ending COAL, or starting/ending distance from the lands? At 2.800" COAL, exactly how far off the lands is a 175 CC bullet actually seated? In your testing, did you seat them farther out in the neck toward the lands, or seat them deeper down in the neck?
3) 43 gr Varget under a 175 is a fairly light load, even in a rifle that weighs in at less than 12-14 lb. If that feels like "harsh" recoil to you, you have a pretty critical issue with recoil management that needs to be solved; above and beyond any load development concerns. If a strap-on shoulder recoil pad or different buttstock pad doesn't help, I'd suggest that you may be wasting your time shooting a .308. Shooting 175s at low velocity is not really a recipe for success in a .308, anyhow. You could easily load up 80-90 gr bullets in a .223 Rem rifle and markedly surpass the performance of slow 175s, with a significant reduction in felt recoil. Something to consider, at any rate.
4) Changing seating depth, especially .005" at a time, which is a relatively coarse increment, should be anticipated to change group spread, perhaps significantly. Clearly, the seating depth where you originally had the 175s seated was working. If you want to find a new seating depth optimum, you may potentially need to test over a fairly wide range to find the next adjacent seating depth optimum. If you have to move the bullets more than about .020" to .030" in either direction, expect your velocity numbers to start to change as you increase/decrease the effective case volume and change pressure. It may also be necessary to optimize powder charge weight in order to fully re-tune the load at a different seating depth.