Let me see if I can explain it. The dot does a good job smoothing out treble peaks without reducing the overall treble. The felt discs are used to attenuate the upper mids and treble in a broad sense, if you want that. I preferred a different, lighter material disc I made for myself when testing the AD the 2nd time (I wanted less attenuation), but the felt Dan is using works well for its purposes and will likely be well received for those looking for that type of change. I think the majority of folks will be most satisfied with just the dot.
I'm not able to explain how every different frequency and its amplitude affects what we hear, but you do have to understand that these "other" aspects of sound, such as soundstaging, are directly related to, but not always entirely explained by, the frequency response and other measurable aspects of the device. I believe a blacker background was another improvement Dan mentioned.
For me, I clearly heard treble peaks when I originally sampled the Alpha Dog. These peaks would amplify certain aspects of the music, and it follows those amplified aspects would stick out more (think more in-your-face...like a Grado, kinda). For example, certain cymbals sounded detached from the drum kit and were now placed directly next to my ear. Highly distorted guitars were extra aggressive, grainy, and, again, sounded as though they were right next to your ear.
After attenuating those peaks via EQ, everything that stuck out like a sore thumb took a big step back and got in line with everything else. You could say the soundstage didn't really increase as a whole, but these amplified aspects tended to cover up a lot of soundstaging and imaging elements or, at the very least, make the imaging and soundstage seem a bit disjointed.
It could be just that...that the peaks amplified certain elements of the music that make many instruments seem closer to you. It could also be that those areas happen to generally contain a lot of information related to the acoustic space, instrument placement, etc. If too amplified or attenuated, you might be able to see how that could start to mess with the perception of imaging and soundstage. But, as I've said, I can't explain exactly which frequencies tend to contain exactly what sort of information...I have a vague feeling for it myself, and it definitely varies with what you're listening to.
These peaks also created a sort of "grainy" sound on a lot of instruments to my ears (think a TV with the sharpness set too high). Many perceive this as additional detail, and I can see why many would like that. I thought the peaks were strong enough to overpower much of the music and give it an overall grainy quality vs. just an isolated, grainy quality. In a sense, you could think of this as a grayer background due to the grain/noise. Smoothing out and attenuating these areas help alleviate this and give a sense of a blacker background. Or, depending on your music material, other audio gear, and personal hearing sensitivities, you might just hear it as a loss of detail.
Again, a lot of this depends on what you listen to. I came across many tracks that sounded barely any different with/without EQ in those spots I found troublesome. Then you have to account for driver variation, personal preferences and sensitivities, and so on.
You can always try running your Alpha Dog through SineGen (not too loud!). That can help you identify peaks in the sound, likely a bit above 4KHz and 8KHz on the AD. Play around with a graphical parametric EQ (like EasyQ) when listening to music. See what happens if you tone those spots down...or turn them up! Try a wide variety of tracks. That should give you some sort of sense whether or not you might benefit from smoother treble on your Alpha Dog.
You could also attempt to rig up your own version of the dot tweak and get a rough approximation for what it will do, though you'd want to use a light, easily removable adhesive as to not damage the headphone (i.e. thin strips of double sided tape, put on and pulled off some fabric a few times to reduce adhesiveness). You could try fabrics, felts, open-cell foams, layered materials, etc. Again, rough estimation, basic, and temporary, but if you like the changes, you'll probably like the dot tweak. I'd still recommend EQ first, though, because it's easier and less risky but will still give you a good approximation.
I'll be writing up a review for the Alpha Dog in their current state, if you happen to remember my original impressions. It's a small, simple tweak, but the dot literally made the difference for me (uncomfortable to listen to vs. maybe I should buy these).