Thanks to peter and Chauncey for responding in the other, main thread about the Knight/Paladin.
My Paladin seems to have some small metal piece floating around inside the tailcap.
Looking at the diagram from PK that peter posted up AND combined with the photo badtziscool posted, it does look like the safest way to remove the tailcap is to simply screw it off and hope that the retaining ring pops inward.
I figure what I need to do is come up with a way to really torque on the tailcap and body without damaging either's finish. Maybe a pair of tiny strap wrenches wrapped tightly around inner tube scraps...
Not too sure if this is pertinent here or not but when I had the same kind of issue with a Ti Mini MKII the problem ended up being an almost microscopic sliver of metal somehow loose inside the threads where they make and break contact thus switching the light off and on or in my case on and on which is what yours seems to be doing as well?