Use the same RAW converter you use to process your images.If you can make the text legible by adjusting the exposure control or curve in the RAW converter, then you can do the same thing on a real image to dig detail out of the highlights or shadows
At this point one needs to think about the sense of the excercise.
Do you own a camera and want to measure it's DR? What for? It's a bit too late, isn't it?
Do you want to compare different cameras? If you do it for yourself (i.e. if you can carry out the test with different cameras before making the decision), then it is a useful test.
However, if you are doing this for a "public" review/test/comparison, then it is pretty much useless; what is the sense in doing that with a particular raw converter?
ACR handles highlights particularly well
ACR handles highlight particularly badly. Not only, that it's clipping indication is worthless regarding the truth about the exposure (that is the case with all raw converters I know), but the support of some cameras is totally off in this regard.
Capture One and some of the MFDB manufacturer's programs seem to toss out 2-3 stops of highlights
I suspect this is not so. This is my "belief", because I am not working with C1. I think those highlights can be "recovered" (a very bad term in this context, because they were not lost in the first place) by simply reducing the exposure. This is, what one has to do in ACR as well, when the program misinterprets the raw data.
The fact, that this is necessary with the HW manufacturer's own software is quite troubling in my eyes.
Whether or not one can read a bit of text in background noise is still somewhat subjective, but much more objective than some of the other methods floating around.
The most objective method what I saw is the statistical analysis of the data. The pixels of an evenly lit uniform surface are supposed to be close to identical; the deviation indicates the noise (above some limit, but that's irrelevant here).