I do almost all my PP in Lightroom, working on the RAW file. Lightroom doesnt actually alter the RAW at all, just creates an editing sidecar file with the changes in, which you see rendered on what is in effect a preview image. Then when you wish, you can create a converted image as a TIFF or JPEG (or DNG, though I dont quite see the point!) in 16 or 8 bit for further work. I must admit, since using Lightroom, I very rarely need Photoshop - only for stuff involving local corrections or layers, which I hardly ever do. (This is why I havent got to grips with CS3 yet!)
To answer your original point Roy, with good glass you can get astonishing detail, even at 100% crop, although as you say, the printing options decrease.
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