I wanted to finally take the time to update the thread here. My dealer did get the tractor back to me after a week or two in the shop. They had someone from Kubota look at it and they agreed the plumbing was incorrect. The third function has to be before the backhoe in the circuit or it can cause back pressure on the backhoe valve block.
When I got the tractor back, the I tested the backhoe for a few minutes (at around 2200 rpm I believe) by using the various functions against a stump to create load on the system. I did not notice any leaks, but I had to drop the backhoe the same day to get my cutter on to get my mowing done before fall set in. I have since had to grade my driveway so I haven't had a chance to put the backhoe back on and give it a through test.
When got the tractor back, I think my third function controls are now reversed. Not a big deal since I can simply swap the hoses on the front, but I am curious why they had to swap those hoses. I don't know if the third function has a port that is supposed to be input and one for output. If anyone knows please let me know.
Nonetheless, I traced the hoses and things look correct now, at least with regards to where the backhoe and third function are in relationship to each other in the circuit. I would definitely encourage anyone that gets a new tractor to check the hydraulic plumbing before using it much to make sure your dealer gets things plumbed correctly, especially if you have a power beyond/backhoe kit installed.