Hi,
First i must say i'm no pro at recording, neither a pro musician. But as a physics studing i'm trying to apply some logic rather than to write 'by experience'.
I totally agree with you, but i think there are some issues that need more detail...

As you were talking about bit-depth in DSP processing, a thought came to my mind -- there are some effects(distortion, fuzz-es and such) that do introduce a huge gain boost like those 40dB needed to hear all the subtleties. It's not that i say that some sound source-sound detail will arise, but still the sound of the electric/thermal/acoustical noise now needs to be reproduced faithfully for the processed version not to be too-unnatural sounding. I think this is of utmost importance to some super-vintage-analog sounding-gear. So really, for such applications at least 20 bit source is a must. But it's all mostly about some "super-rectifer"-heavy metal gutars or some grunge etc and some other guitar gear.

And the second, as far as i know most modern DAW use intermediate 64-bit floating-point for mixing, or at least mix at 24 bit. I know that article dates 2001, but still. So source files don't really have to be more than 16 bit for this purpose, especially because they are usually multiplied by a less than one coefficient at a much higher resolution. So all the math issue just disappears. This can also be said about DSP processing -- no one said it has to be done at the same bit-depth as the source.