Holley/Demon Carb stumble

Frankly, if it pulls the upper rpm fine through 1st and 2nd, and lays down in 3rd...... sounds like fuel delivery.

Have you done a proper flow test?

Imo, this is the only kind of test worth doing:
Disconnect the line from the carb, and install/adapt a small ball valve onto the end of the line.
With the pump on and fuel flowing into a container, adjust the valve so the pressure gauge reads 6psi.
Do not move the handle on the valve....... shut pump off.
Using a pretty accurate 1 gallon container, with a helper........ have them turn on the pump, and with the gauge still reading 6psi, time how long it takes to fill the can.
For a 500hp motor it should take less than 85 seconds.
550hp - 78 seconds
600hp - 72 seconds

I’ve seen it numerous times where a fuel system would pass the old BG free flow/timed test and totally fail the flow@pressure test.