"DR400 @ ISO 400 is actually using ISO 100 gain" - I agree.
"but a curve is applied (in C1 and for JPG's) that lifts the image 2 stops, except for the highlights that are still at zero (ISO 100)" - this, I don't know.
My question is: how does the image shot at ISO400&DR400 look to you when compared with the image at ISO100&DR100 where I lifted "exposure" by 2 stops? To me, the two look of nearly indistinguishable brightness/lightness.
We may differently understand the intended application for DR200/400 setting. I understand the intent behind this setting is to protect the highlights by increasing the headroom in the highlights. There are two very different ways of dealing with this:
1) At the base ISO, the sensor is near its full-well capacity. The principal concern is about saturating some of the photodiodes when there's extra bright light in a photographed scene. The only way to deal with this is to reduce exposure by increasing the shutter speed or closing the aperture. This is what working in full manual doesn't allow the camera to do. You note that the blown highlights are the same in the images taken at ISO100&DR100 (with "exposure" lifted by 2 stops) and ISO400&DR400.
2) From ISO = 2 x base ISO and higher, we have less-to-no concern about the sensor being saturated. In this ISO regime, the principal concern is about ADC overflow - clipping in the ADC, caused by too much analog gain on the signal from the sensor. The way to deal with this is by offsetting the gain internally, with Raw Exposure Bias, by 1 stop with DR200 or 2 stops with DR400.
I am presently using my camera with Dynamic Range set to Auto, in Aperture priority. I let the camera decide when to switch from DR100 to DR200. It seems to be acting reasonably so far. This approach suits my shooting style, as most of what I do can be called casual snapshots. When I see something that catches my eye, I stop and take a quick shot, then continue walking/hiking.