Well, I made time to try to sort this out. After all, it is the weekend
.
Here's a quote from the DPR review on the K-5 regarding the highlight correction.
"The K-5 features a
highlight expansion function which applies to both
JPEG and RAW;
shadow expansion can also be applied to the camera's JPEG output....(my note....so there's no reason to use it if one shoots in RAW.) With Highlight correction activated ISO 160 becomes the minimum sensitivity setting, and the tone curve is flatter in the highlights giving an extra stop or so of highlight range. If you compare the K-5's dynamic range curve with highlight correction turned on against the Nikon D7000's default output, you can see that they match almost exactly. Since the two cameras share closely-related sensors, this strongly suggests that the Nikon is essentially performing an equivalent to highlight correction by default. The noise floor of both cameras is low enough to do so without any serious penalty in noise levels,
and for this reason we'd recommending keeping highlight protection activated on the K-5."
One can see the graph of the response curve here:
Pentax K-5 In-depth Review: Digital Photography Review
That said, I strongly suspect most of the other image capture parameters (sharpness, noise reduction, etc.) are only used with in-camera processing, i.e., jpeg images. I can't at the moment find anywhere that states this specifically, but here's a statement from the same DPR review that strongly indicates this is the case.
"The K-5 has a very similar sensor inside it to the Nikon D7000's, and like the Nikon, the K-5 displays excellent image quality across almost its entire ISO span. Things fall apart a bit above ISO 6400, but careful tweaking of the NR settings
(or even better, shooting in RAW mode) will enable you to get acceptable results out of the K-5 even up to ISO 25,600. The ability to fine-tune noise reduction to every ISO setting is very valuable here....(my note...but only in jpeg.)"
I could be wrong, and absolutely no offense meant to anyone. Just scratching my head out loud.
And I've set the extended ISO range to ON as well as the highlight expansion function.
Hope this helps anyone else experiencing some confusion about this issue. Set the custom image capture modes, including NR, only if you shoot jpeg images. Which means maybe everyone, at least occasionally, especially when shooting action photos. But don't expect those settings (other than highlight expansion) to modify the RAW image. Modifications to the latter are made in post-processing.
Thanks to all responders,
BAB