I for one find this discussion both entertaining and useful in aquiring knowledge that I did not previously have.
I have a question: Am I understanding the statements in this thread correctly if I say that you cannot increase the DR in your image because it is a hardware limit? The reason for my question is that I have been looking at videos @ youtube for good tips on black and white conversion in photoshop, and in several of these videos they claim that you can increase the DR by using layers and tweaking Levels and Curves....
If you use raw - no. you get what you get.
If you use jpg - yes, because jpeg by definition has smaller DR than raw and you have to squeeze more information into smaller DR of jpeg file.
Jpeg has 8bit per channel 2^8=256 gradations of each color, 256*256*256=16,7 millions color combinations, raw has 12, 14 or even 16 bits per channel. Of course not all of DR of raw file is used (depends on the scene), but it is much bigger anyway.