Does the variable power just set the dead key or adjust the power itself?

From the factory, the knob will control both the deadkey as well as the PEP power. Depending on if someone tunes the radio, and the modulation adjustment is turned up too high, the power knob will primarily affect your deadkey. If you back down the AM ANL adjustment inside the radio, it will then allow the power knob to lower the PEP power as well. There is a happy medium where you will have both loud modulation and still have control over your power output.