moltenmetal, chapters and verses are not necessarily tattooed for me, but I do deal with it day in and day out.
The design margins for ASME Section VIII, Division 1 is as follows:
Yield - 1.5
Ultimate - 3.5
The design margins for ASME B31.3 is as follows:
Yield - 1.5
Ultimate - 3.0
The 1.3 factor on the MAWP for the hydrostatic pressure test (modified by the ratio of the allowable stresses - St/S) in Section VIII, Division 1 is a minimum factor. And please note that there is NO maximum. The sole requirement is that there is no permanent deformation deemed excessive by the inspector. Although good engineering practice would say that you should keep below the engineering yield - that good practice is only for the "general membrane" stresses. In fact, at local structural discontinuities (such as head-to-shell junctions, or at nozzles/manways), it is expected that yielding (sometimes significant yielding) will occur during the test. However, this yielding will be very localized, will not produce significant deformation, and will only have the effect of producing a compressive residual stress field.
I will note that the engineering yield value - generally stated above as "yield", is actually calculated using the 0.2% offset method, which means that a stress of that magnitude will result in a permanent strain of 0.2%. But almost all of our materials have strain hardening (cast irons and other brittle materials notwithstanding), so small amounts of permanent strains are expected (and large magnitudes above this value were likely imparted on the material with the forming.