For the shadows the ISO 100 lines are being discarded from the composite raw, which reduces the light-capturing surface area of the sensor in half.
Thanks Horshack-- funny how the obvious sometimes escapes me. Although, b/c they're interpolating between the two ISO exposures, you can set up the algorithm to only use the ISO 1600 file where read noise trumps shot noise contributions significantly. But I see what you're saying -- when you do that, you pay a cost due to shot noise contributions (vs. exposing the whole image at ISO 1600, for example).
But typical 'engineering' DR calculations using SNR of 1 as the lowest signal don't consider shot noise, correct? Therefore, one could still say that the engineering DR is extended to FWC/read noise @ISO 1600, which is ~14EV. If you're using a higher SNR cutoff of, say, 20, then the DR is much more modest (considering the increase in shot noise contributions you mention).