This might help figure out the knobs and possible tones. This is an article that Chip Todd wrote some time back about the T-60. Just substitute T-40 anytime you see T-60 and all should apply.
The Secrets of the Peavey T-60 Guitar as told by Chip Todd
It has been said many times that the Peavey T-60 guitar is capable of many sounds and tones from the pickup and wiring design. The only problem is most people that own one of these instruments are not aware how it works or how to adjust anything to get those wonderous tones.
The basic layout of the instrument is two splitable humbucker style pickups. One located at the bridge, the other located at the end of the neck.
The controls consist of two sets of volume and tone controls, one for each pickup.
The pickups are split into single coil pickups by applying a ground connection to the middle of the two humbucker magnetic coils. This bypasses one of the pickup coils and the remaining coil becomes a single coil pickup.
The tone control darkens (makes the sound more bass) the pickup sound by slowly grounding out the pickup through a tone capacitor.
The genius of the Peavey wiring design is that when the tone control is turned clockwise it applies ground to the pickup center and splits it into a single coil pickup. When turned counter-clockwise the tone control removes the ground from the pickup center (returning it to a regular humbucker pickup) and then slowly applies ground to the capacitor, which darkens the tone.
Therefore using the volume and tone controls with the three position selector switch, many various pickup combinations can be achieved. The volume controls have a .001uf capacitor bridging the input and output terminals. This they call volume compensation. It allows the sound of the pickups to remain constant as the volume is reduced.
There is also a phase switch, which reverses the positive and negative connections of the bridge pickup. Pickups connected out of phase have a hollow, tinny, mouth harp kind of sound. When the phase is used, this is where the real genius of the wiring design comes into play.
First of all, when the bridge pickup is selected and set at single coil setting on the tone control, the phase switch can be used to select either coil of the pickup.
Second, when the middle pickup switch position is selected and the phase switch set out of phase, those volume controls have volume compensation. This means that as the volume control is rotated counter-clockwise, the volume is slowly reduced and the output of the pickup is passed through the .001uf compensation capacitor. The capacitor counteracts the out of phase sound characteristics and creates a rich mellow refined pickup sound. Now with the pickup selector switch in the middle position and the pickups out of phase, the volume and tone pots can be used to create many new sounds from the pickups, in addition to the many already achievable from the in phase setting.