yes you should be able to see the KIPS linkage move when revving the motor...the governor rod should move outwards under high revs.
I would suggest picking up a Kawie Service manual...to be sure you have the KIPS valves timed correctly. I've never worked on a KX85, so I'm not sure if it's different from the 250's and 500's, although, I wouldn't think they're set-up much different.