Yes you might be right Jon, I'm not sure.
I follow your reasoning and apply a similar vision on how TG parses the network (from bottom up, actually)
The way you explain it sounds to me like the compute terrain potentially limits the maximum amount of surface detail allowed, but with standard 20m we can easily have smaller scale details.
Normally, without any patch size computations, if you would apply displacement to such smaller scale terrain details then displacement direction would follow the normals exactly everywhere, causing many many spikes/needles/artefacts.
To avoid this we would need to average the normals over a given area, the patch size, to make sure that the normals of small scale details are weighed less.
To calculate that average, you'd need to parse over all those normals.
Otherwise I don't see how we can have small scale displacement details, smaller than the 20 meter default patch size.
There must be some sort of interaction with the micropoly renderer as well, because with higher surface detail you also create more triangles and more normals to be evaluated by the compute node.
In overall the lower octaves are dominant I guess, because they cause the biggest displacement amplitude and therefore are the biggest contributor of surface normal change.