Kohler Push Button Diverter Leaking from Shower
So it looks like it was a bad part, see the o-ring missing below. BTW, you just need a deep socket wrench to remove the diverter, I wasted a few hours looking for plumber's wrenches before figuring this out...lol. 

Glad it's working now but this valve kit was brand new, seems odd that something so critical would be missing. Also the part that I pulled seems used or refurbished (see discoloration). I hope the rest of the valve is ok.