I don't know what the stock oil was supposed to look like, but here's what came out with 4200mi on the bike. The aftermarket oil I got from Cycle Gear is nearly clear.
What came out: The cap, the spacer, a washer, the spring.
The longer, progressively-wound springs on the top are the L2 DL650 stockers.
The shorter straight-rate springs on the bottom are Sonic 1.1kg.
UPDATE: I should have read the instructions - setting the overall length of spring+spacer the same as stock seems logical, but is not correct. I don't remember the actual spacer length (hello, internet?) but it's shorter than stock. I think this is to compensate for the new springs being stiffer.
I'm not sure that backing the adjuster all the way out/ off would be as dramatic as it might at first seem: it would impossible to do it to BOTH forks at the same time (front end wouldn't collapse), and the spring and spacer would still be in there keeping the fork from collapsing - there's nothing to really come shooting up out the hole... well, except air and oil - but that would required a collapse to occur and the other fork would prevent that.
Hopefully the logic of not needing the cotter pin is sound, because I left it out to enable a flush fit with the PVC spacer. The cap on top is complete; the cap on the bottom has had the cotter pin removed and the washer lifted off. When re-assembled, the fit in the tube is tight enough that the preload adjuster can't NOT find that hole, and of course the spring pressure holds it all together.
UPDATE: When I took it apart to change the spacer length, I also cut away a little section of the end of the spacer to fit the cotter pin. ... or I used a different cotter pin and bent it to fit - I don't remember.
I set 150mm headspace with forks collapsed and spring and spacer/ washer out. I used 15 wt oil to slow down the damping to better match the higher-rate spring.
Verdict: I've only been around the block, but brake dive is noticeably less. I'll have to get some miles on it before I'll know if it did anything to handling.
UPDATE: I waited too long to update this post - it's been a year and I don't remember the handling prior to the spring swap other than that it was mushier, which is to be expected. I have no complaints about the current set-up, but I don't 'push the envelope' with lean angles and agressive breaking, either.