Sandy, the article you refer to does go into the details of the decoding process. Those are fine. I was referring to the encoding process: how does one take the raw mosaic data and generate the subsampled YCC sRAW (or, now with the 7D, S-RAW and M-RAW) image values?
Scott, DNG supports two basic flavors of image storage: (1) mosaic image data (i.e., color filter array (CFA)), in a variety of mosaic patterns, and (2) non-CFA image data, like RGB or GMCY.
Canon's compressed sRAW format does not fit either category. It is certainly not mosaic data, so it cannot be represented by option 1, i.e., mosaic DNG. Once the sRAW data has been decompressed and mapped to a RGB color space, it can be stored via option 2, i.e., non-CFA image data. However, the image is now much bigger in size, because each pixel in the image is now being represented by three separate 16-bit values, one for each color component. As observed above, this makes the resulting DNG file much bigger than the original sRAW.
While I agree that, from a file size point of view, it is rather useless to convert sRAW files to DNG, this does not mean it is a bug in DNG. It simply means that DNG, as currently specified, cannot store sRAW image data directly -- and hence has to map it to another (unfortunately larger) format that it can store. It is possible that future versions of DNG will offer additional compression or image storage abilities which will address issues like these. In the meantime, if you wish to keep file sizes small when shooting sRAW, I recommend sticking with .CR2.