IIRC TOS 4.04 blindly assumes that all memory is usable by the blitter and does not avoid the TT-RAM for buffers that are used by the blitter. That was likely the reason for the code that we had there. I assume that CT2 or Afterburner patch the TOS so that it does not use the TT-RAM for the VDI?
And to make things worse, it didn't even "fix" the issue I reported in the first place.
In the meantime I have found out that the code in question doesn't even use the source buffer in TT-RAM (it uses the halftone Blitter memory instead). The true origin of the problem was that I put too much trust into SuperVidel's mirrored display -- when I enabled plain Videl output, everything was OK. So there's a Blitter-related bug in SuperVidel, not in the game.
As for the CT2 etc: yes, all of them require you to install NVDI to avoid issues with Blitter accessing TT-RAM.
So as far as I'm concerned, if it's more user friendly to keep the src/dst blitter address supporting full 32-bits, keep it like that. I don't have any regression to report on this matter anymore.