Error in decompressing lossy Nikon D3 raw files

Question

Both the 12-bit and 14-bit *lossily* compressed files of the Nikon D3 are decompressed incorrectly. I can't make any statement re D300 files, for I don't have any lossily compressed raws.
Example: http://www.panopeeper.com/Demo/D3_ACR_demo.jpg
A 12-bit raw file is here: http://www.panopeeper.com/Download/_DSC7043_12bitlossy.NEF
The break is at that row, where the Huffman definitions have to be swapped; this is so with the 14-bit file as well.

Answer 1

>WHY in the world would anyone use lossy RAW?
>You're effectively throwing out detail just to keep tonal range... Sounds sloppy.
With compressed NEF, what you are throwing out are redundant highlight tonal levels which the eye can not detect, not image detail. The details of NEF compression are reviewed in the links below:
http://home.comcast.net/~nikond70/NikonInfo/NEF_Compression.htm
http://www.majid.info/mylos/weblog/2004/05/02-1.html
A 12 bit linear raw file contains 4096 levels of brightness, and 2048 of these are in the brightest f/stop. According to the Weber-Fechner law, the human eye can distinguish only about 70 of these 2048 levels. Many of the levels are redundant and can be eliminated with no visual loss, even they might be useful for highlight recovery or extensive editing of the highlights.
For a discussion of encoding efficiency, readers are directed to a post by Greg Ward.
http://www.anyhere.com/gward/hdrenc/hdr_encodings.html
In the section on Microsoft/HP scRGB Encoding (a proposed "HDR" format, he notes:
"Presumably, a linear ramp is employed to simplify graphics hardware and image-processing operations. However, a linear encoding spends most of its precision at the high end, where the eye can detect little difference in adjacent code values. Meanwhile, the low end is impoverished in such a way that the effective dynamic range of this format is only about 3.5 orders of magnitude, not really adequate from human perception standpoint, and too limited for light probes and HDR environment mapping."
So the answer to your question is that compressed NEF saves space without affecting visual quality. With the Nikon D200 (a 10 mega pixels), the compressed NEFs are about 10MB compared to 15.5 MB for uncompressed. The D3 (12 mega pixels) has losslessly compressed NEFs which are about 13.5 MB for 12 bit files (it also offers 14 bits).
With the D200, I (and most photographers who post on the forums) often used compressed NEFs for all but the most critical images where highlight detail might be important. No one had demonstrated a loss of visual quality. In my experience, highlight recovery works quite well with these compressed NEFs. With the D3, I use the losslessly compressed NEFs, since the file size is reasonable and no data are lost.