Matt -
First off, what do you weigh, and what year is your KDX?
The reason two (really three) sag measurements are taken is to determine if you have the right spring rate for your weight. Say for example you ignored static sag and just look at race sag. You'd be measuring how much your (dressed in gear) weight compressed the rear suspension, relative to the amount the bike unladen compressed the suspension. If it were say 4.5 inches, you would add preload until it came up to just 3.5 inches to have the correct "race sag".
With this method, we can't tell if the spring rate is OK. See, as you add preload the static sag (amount the bike-only compresses the susp) is reduced. If you added so much preload to get the race sag to 3.5 inches that the static sag went to zero, the suspension topped out from the spring, then we would conclude that you need a stiffer spring.
So, to set your sag, here is what you do (assuming '95-'01 KDX and you weigh between 160 and 190 with all your gear and helmet on).
1) Put all your gear on.
2) Have a friend over to help.
3) put the bike up on a stand, and measure from the axle nut to say a mark on one of the number panels. Write this number down as "A".
4) Take the bike off the stand, then "top" the suspension out and let it back down. Take the measurement as in step 3. Write this number down as "B".
5) Push down on the seat, let the seat rebound back up. Take a measurement as in step 3. Write this number down as "C".
6) Get on the bike (all your gear and helmet on) and sit fairly close to the tank. balance the bike so all your weight is on the bike, none on a foot, and have your friend take the measurement as in step 3. Write this number down as "D".
OK, now that we have the numbers, let's do the cipherin' and gazintas.
1) Add B and C together, then divide the result by 2. Call this result E. Now, subtract E from A. The result is your STATIC SAG. It should be between 1/2 and 1 inch.
Formula: (B+C)/2=E
Formula: A-E = Static Sag
2) Subtract D from E. The result will be your RACE SAG. It should be between 3 and 4 inches.
Formula: D-E = Race Sag.
Look at your RACE SAG to determine if you are going to make an adjustment. If it is less than 3 inches (and if it is in the stock position it will be) then remove a full turn of preload and start over. If over 4, then add a turn of preload.
The preload on the KDX is changed by turning the two big rings on the shock body. I use a long punch and a hammer to loosen the top ring then turn the bottom ring. Be sure and put an index mark on one of the flats of the bottom ring so you know when you have made a full turn.
Ideally try to get your KDX at 3 and 1/4 to 3 and 1/2 inches of preload. After you get it there, then re-check your static sag as described in steps 4 and 5, then cipherin' step 1. If you are still in that 1/2 to 1 inch range your spring rate is OK for your weight.
Now the bad news: even after you get the sag set on your KDX, the bike's suspension will still be out of balance (assuming you are the correct weight for the rear spring). The rear spring rate will be higher than the front. TO fix this, you can do one of two things:
1) replace the fork springs with stiffer springs
2) dial back in about 1/2" more race sag
I did #2 on my XR250 and it worked much better than with the "correct" race sag. I then went back and put in the stiffer springs and dialed on 2 more turns of preload on the back and she handles GREAT now.
Does this help, Matt?