Well guys.
I feel like a colossal idiot. I put headphones on and didnt really hear the problem too much. I still heard it slightly. I lifted my headphones and turned off my guitar to hear if the strings were what I was hearing. So then I turned my KPA up louder than I usually play and the problem was mostly gone. I now focused on the strings and It was becoming pretty clear that it was the strings I was hearing and not some malfunction of the Transpose function.
So as a final test I did a recording to see if the problem was heard in the recording. The recording sounded great with no problems at all!
All along is was simple operator error on my part.
You guys called it right! It is the strings that we are hearing. I dont know why I didnt pick up on it before. Because we are not down tuning the guitars physically but altering the tone in the KPA the strings still ring out in standard or whatever tuning you are in and it creates that harmony like note when using the Transpose function in lower volumes. When you play louder or record and dont hear the string ring out its accurate and works amazing!
Thanks guys!