I think it's pretty obvious (as stated in OP) that if USD experiences inflation then Hive gains in market cap.

I don't see that the USD inflation and the HIVE marketcap are directly correlated. For this to happen some of the extra USD money supply has to flow to HIVE but it's more plausible that it will go to BTC instead over a long enough period. Once the hive inflation schedule stabilizes at 0.95% (in about 16 years) theoretically HIVE should start to appreciate against the dollar.

In reality the money supply by itself has little effect on the relative price of any coin. For the difference between two currencies' inflation rate to manifest on the exchange rate the demand side of the market has to change in tandem. But the demand of any item is also influenced by other market forces.

My reasoning is that since the price of hive is not directly correlated to the inflation of the US dollar changing the peg to match it will create an incentive to permanently convert HBD to HIVE at an increasing rate which is not in the best interest of HIVE holders as this creates extra selling pressure on it.

Creating sinks for HBD is an interesting proposal for destroying part of it's supply as opposed to converting it to Hive.