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Regardless of the preview size that you choose to have Lightroom generate, those previews are only used in the library module. Lightroom always generates a preview of the raw image data when using the develop module. I can't comment on creating smaller previews when converting to DNG. I have always just left it set to the medium setting. You will have to decide what is best for you. If that 10%-15% savings is critical for you then go ahead and generate smaller previews. Those previews within the DNG file are used by some programs that don't recognize or allow you to work with the raw image data. Those programs will automatically display the embedded JPEG preview.
Thank you Jim. All kind of logic but needed confirmation. I cannot stay with Adobe photo workflow only althought it is tempting. The storage savings (live and backup) are significant besides external editing without going to TIFF, and other things. I kept it to 'medium preview'. I use Photo Mechanic for mass triage of my images and that tool needs the DNG preview for now. Will see in the future.
Per NEF file converted to DNG, the size reduction is between 35-28% using with the medium preview and no compression.
Interestingly, a compressed DNG gets way below 10MB on today's DX-FX sensors generated RAW files. It seems that even these DNG files do not show any quality reduction when developing in Lr and Ps on larger monitors--even demanding studio portrait and model photography where the nuances in color graduation and luminescence are crucial.
I seems people stick to their use of RAW files because out of habit. I updated my workflow and convert automatically to DNG and backup the actual RAW in a backup drive using the same structure like my Lr folder structure. Works great.
I am not there yet using compressed DNG without medium preview but I will create a new catalog for parallel testing and investigating. I think Adobe does the right thing is effective workflow and interconnected tools in the Adobe CC.
Of course you should do what works best for you. I know that DNG compression in the compressed format is lossy. Only you can determine if the quality loss is detrimental to your workflow. I prefer working with the original NEF files.