I wonder if both conversion fees should be settable by witnesses within a hard-coded range. The range itself could only be changed via hardfork, but the conversion fees HIVE <-> HBD should be options that witnesses can change depending on market conditions within the hard-coded range.

An approach would be to relax (lower) the HIVE -> HBD conversion fee during a bear market and tighten it (increase) during the bull market. For HBD -> HIVE, the conversion fee would be relaxed during the bull market and tightened during the bear market. Tightening (higher fees) should be correlated with market dynamics and relaxing (lower fees) should be inversely correlated. Hopefully, I'm making sense!

What you are proposing, a 25% conversion fee on HBD -> HIVE is definitely too high under normal conditions, but it's an option if the blockchain is under attack. And witnesses can act quicker than a hardfork can be implemented, tested and nodes updated. And your proposal doesn't take into consideration a pump and dump attack in a bull market, while these settings being available for witnesses should be more flexible in all situations I can think of unless the governance is compromised. The stabilizer can only make a difference up to a point in both directions.

Also, think about this: the conversion mechanism is the blockchain's guarantee that HBD is 1$ worth of HIVE. If you add a 25% conversion fee to it (or any fee for that matter) then you de facto reduce the guarantee to 75c worth of HIVE. Probably why no fee at all was included on HBD -> HIVE conversion. But probably we should have an option, just not use it on HBD -> HIVE unless we are forced to.