Technically, gamma doesn't increase contrast. Increasing contrast equals stretching the histogram, so the darks get darker, lights are lighter, and colors get more saturated. Don't remember how gamma worked in 2.05, but in 2.07/beta VBO update 10, *r_gamma* works similar to output levels black point.

The current "gamma correction" does not influence interactions.

Note that in a proper rendering engine lighting is computed in linear space, and gamma correction is done as the last step. This gamma correction converts the colors from linear space into gamma space. Then the physical monitor has the built in gamma transformation (left over from CRT times), so it transforms colors back from gamma space into linear space, and shows linear intensities. As the result, light sources with quadratic falloff look on the monitor as they look in the real world.

Now with TDM I have no idea what convention is followed. But since all the math is done in additive way (i.e. impacts of lights are added), the whole thing can only be correct if all the colors are in linear space during rendering. It means that someone has to convert them to gamma space at the very end, otherwise monitor will apply gamma transformation to gamma space, and the picture will be over-contracted. As the result, light sources with quadratic falloff will look unrealistically concentrated (since they will actually have falloff with power 4.5): they light close things too bright, but have too small effect on things farther away.

The new way gives absolutely no way to correct gamma curve of the actual light sources, while the old way did.

Moreover, the old way was right on the conceptual level, although this correctness gives no benefit if everyone tweaks media using gamma = 1.2.

The serious problem with the old way is that color banding appears on dark colors, because all intermediate rendering results (in linear space) are stored with 8-bit precision. And the common way of fixing it is simply using more precision, e.g. 16-bit floats for colors. This approach is called "High Dynamic Range", and it is necessarily used for physically correct lighting.