Regarding volume control issues, we will certainly look into this and try some other methods to mimic SoundFlower’s behavior. The core DPS algorithm now contains a volume control API so this may be feasible. However, we will be limited to the features offered by the CoreAudio API.
Your observations about DPS processing being non-liner are completely correct. However, unlike most compressors that “smash” the signal as you describe, DPS responds much differently and can actually restore dynamics where our ears hear them best.
You will notice DPS changes the level differently for each song or media type so you will have to adjust accordingly if you want to match perceived loudness of the source.
We have used DPS in the past to conform video sound tracks to ITSU loudness standards with excellent results. Let us know if this works for you.