To make that claim that it is impossible to generate more value than you extract (when extracting everything) is provably incorrect.

Prove it. I am waiting.

It's a metric that will be taken too far and has obvious diminishing returns.

Every metric can be taken too far. That is a statement with no substance.

KE ratio doesn't measure liquid tokens and can't measure stake held with a custodian.

Who would be powering down all their hive just to held them liquid and without the intention of selling them? To get to something like 30 KE ratio, you have to power down 97% of all the hive you have earned.

It also can't measure value held on alternate accounts.

Every account has its own KE ratio.

Take a look at something like the DFH.
The expected ratio there is infinity.
No one is expected to reinvest that money back into the chain.
That's extremely bad optics.

I am all for DHF to go away. It has become a game of who can extract more value from the DHF.

You are forgetting that this is a matter of curation, and no one is entitled to curation. If I see someone that has earned tens of thousands more than me, but has less stake than me. Why should I curate them? KE gives a good first impression of that.