The Summer Summer Series (Knitting): Stressed Much?

WTF is going on? I appear to be knitting with CRAZY tension on the fitted boucle jacket. My original stockinette gauge was 7.5 stitches per inch. I did lots of swatching. I blocked the swatch (it softened but didn't much grow).  I started the back piece. Again and again, I got 7.5 stitches per inch for a number of inches.

Lately, it seems things have been looking a bit, um, tight. I re-tested gauge below the ribbed waist (the first phase of knitting). It was 7.5 stitches. I tested gauge above the ribbed waist. It was 8.5 stitches an inch. If you don't knit, that won't mean much. If you do, you'll know this makes masses of difference to a finished garment. Which is particularly problematic when you're trying to achieve 0 ease (aka perfect fit). 8.5 stitches per inch will make my garment inches smaller than I've planned on. It's even smaller than the pattern's original gauge which I couldn't get, despite all of my efforts, and on the basis of which I drastically altered the pattern.

I've debated what to do. I'm not much of a ripper-outer (obvious mistakes excepted). And, aside from the waist (which I was concerned about enough to knit in the same needle size as the rest of the garment, though the instructions advise you to size down), I'm fairly sure I can sort this out between blocking and going up a needle size. Fortunately, I've made this decision prior to reaching the back-piece underarm section (the under-arm / chest area is the place where I need the most room). As of now, I've switched from the 2.25mm (US1 needle) to the 2.5mm needle (a needle that doesn't seem to correlate in US sizing. I think it's a US1.5?) and this is how I intend to continue. Unless my gauge changes again.

Depending on what comes next, I may opt to increase the dimensions of the front pieces. More likely, I'll keep changing needle size, if necessary, so that I'm sure I've obtained the gauge according to how I rescaled the original pattern. It seems like the wisest approach at this point - though I can't go up or down more than one needle size without risking a weird-looking end result. And of course, as vertical gauge changes with new needle sizes, I continue to make adjustments on that account.

Gotta say, this isn't the mindless knitting experience I was hoping for (after the major, week-long math project that was the original pattern alteration). But it is what it is:

We're getting somewhere - though not at a great pace...

Today's questions: How do you handle knitting projects of varying gauge? (While I certainly have my share of unexpected challenges, this isn't one I've experience before.) Do you leave them for a while? Do you rip back? Do you use a variation of my methodology? I generally knit with lots of negative ease - which means I've got lots of latitude on gauge. This time I'm putting my sense of balance to the test. Sure, I practically always wish I'd made things smaller. But you never know when that's gonna change.