'71 Duster 340 Battery getting overcharged

To answer your question how Vreg works. It senses the voltage difference between its case and its blue wire (IGN, which also powers it). It strives to keep that difference at ~14.2 V. If too low, it conducts more (thru its transistor) to ground which is the "field current", which increases the alternator's "main current" output. If too high, it lowers the field current.

This is a proportional control system, similar to the thermostat in your coolant system. The reason they do "low side control" is that transistors work better that way. Today, they can do "high side control" easily and there are electronic Vregs for the older "grounded field" alternators.