Dear Christopher,
The passage in IPVV, vol. III, p. 348 is as difficult (to me at least) as it is interesting. Needless to say I don't claim to understand it better than you or any of the other learned scholars involved in this discussion, all the more since I am utterly ignorant of Indian alchemy. I would simply like to make a few additional remarks, hoping that they won't end up making things more obscure than they already are!
1. As regards the first part of the analogy: Abhinavagupta also uses the image of mercury transforming copper into gold in Tantraaloka 5.151 (note the use of vedhita by the way): svaya.mbhaasaatmanaanena taadaatmyaṃ yaaty ananyadhii.h / "sivena hemataa.m yadvat taamra.m suutena vedhitam // (Cf. also TA 14.12). See also e.g. Yogaraaja ad Paramaarthasaara 96, p. 186: yathaa taamradravya.m siddharasapaataat suvar.niibhavati... I'm afraid these passages don't shed much light on the problems that you are trying to solve - still, maybe it is worth looking for other passages of this sort that could be more detailed?
2. I would consider with much caution the suggestion that tannijaruupasamyagviddhakanakaruupataa is a marginal annotation that crept in the text of the KSTS edition, and this because (not to mention that marginal annotations are much more rare in IPVV manuscripts than in IPV manuscripts, and understandably so given the length of the IPVV) the IPVV comments on the lost text of the Viv.rti, so that there is much in the IPVV that does not make sense to us simply because we don't have the muula-text (compare for instance IPVV ad IPK 1.3.6 to 1.5.3 with the Viv.rti fragments now at our disposal thanks to Raffaele Torella's editions...So much that sounded like gibberish before makes sense now!). It is true that tannijaruupa- for instance rings like a mere gloss of some tatsvaruupa- ending compound; but then again it is likely that here Abhinavagupta is simply explaining the analogy as he found it in the Viv.rti.
3. I understand why you want piitalataa to mean "gold leaf", although I must confess that just as Raffaele Torella and Ashok Aklujkar, my first reaction was to think "brassness". I see why you want to understand it in this way: you need gold here rather than brass, especially given the passage that you brought to the list's attention in the first place, which is clearly about gold being dissolved by mercury. But I don't know if lataa can have this meaning, and in the context of this analogy we would rather expect a word matching idantaa, i.e. with an abstract suffix. Would it be possible to understand piitalataa as we would understand piitataa, i.e. as "goldness" (given that piita means both "yellow" and "gold", and that piitala also means yellow/yellow substance)? I'm afraid that piitala only designates brass but I have no certainty in this regard. Wouldn't you contemplate a tentative emendation into piitataa then? In any case the compound that you see as spurious could actually serve your overall interpretation. Abhinavagupta could mean that in the turyaatiita state of consciousness even the remnants of objectivity (in the form of residual traces) are dissolved/liquefied and immersed into the pure "I", just as mercury liquefies the goldness (piitalataa/piitataa) that remains (it seems to me that ava"se.sa rather goes with piitalataa/piitataa) due to the force of residual traces, by bringing it into a full "jara.na" (maturation, or whatever this technical term really means) where this goldness (this time kanakaruupataa) is entirely pervaded by the own form of this (tannijaruupa) - that is, by the own form of mercury.
Does this sound awfully far-fetched? I don't know - once more I have no certainty whatsoever as regards the meaning of this passage, and I can only say that you are brave to tackle it!

All best wishes,
Isabelle
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Dr. Isabelle RatiéInstitute for the Cultural and Intellectual History of Asia
Austrian Academy of Sciences
Apostelgasse 23, 1030 Vienna, Austria