1. The advice to set the contrast to anything non-neutral (i.e. positive or negative) is misguided. Positive contrast increases the highlights and decreases the shadows, thereby causing raw conversion clipping. Negative contrast does the opposite, thereby hiding present raw clipping.
There is a great deal of confusion regarding positive and negative contrast settings for the camera JPEG rendering. On the Nikon D3, normal contrast (contrast = 0 in the picture control) applies a rather strong S curve to the raw data, lightening the quarter tones and darkening the three quarter tones. A contrast setting of -3 applies a slightly less strong S curve to the data, but it is still a positive contrast curve where the light quarter tones are lightened and the dark quarter tones are further darkened. The highlight clipping point is not affected by a contrast curve, since input equals output at an 8 bit value of 255. If the camera histogram is conservative and indicates clipping in the JPEG conversion when there is none in the raw file, then a lower contrast curve will lower the quarter tones and decrease clipping in the histogram.
Shown below are TRCs for the Nikon D3 with normal contrast (picture control contrast = 0) on the top and reduced contrast (picture control contrast = -3) on the bottom. These TRCs were produced from the same raw file by varying the picture control settings in CaptureNX, which would closely approximate the in camera settings.
[attachment=16896:NxContrasts.gif]
The effects of curves can be shown in ACR. This Stouffer wedge demonstrates clipping in Step 1 with a linear tone curve.
[attachment=16897:LinearCurve.png]
The clipping is unchanged with a positive contrast curve. The quarter tones are raised as shown. The value of 194 in the file is raised to 251. If the camera histogram were conservative and shows clipping at 251, then the histogram would show clipping when there is none.
[attachment=16898:PositiveContrast.png]
A true negative contrast curve will decrease the quarter tones as shown below. A value of 193 is reduced to 176. A conservative camera histogram would show less clipping.
[attachment=16899:NegContrast.png]
However, true clipping can not be eliminated by a contrast curve, since at the right end of the curve, input is equal to output. To eliminate the clipping, the curve has to decrease the highlights slightly as shown below. If the camera histogram is showing clipping when there is none, the best solution would be to upload a custom curve to the camera that decreases the highlights.
[attachment=16900:DecreaseHighs.png]