You're on the right track. But it's not the diameter of the filament
which matters, it's the volume per extruder step or pinch gear revolution
which matters. The volume of the filament doesn't really change: the
filament is squished and is no longer circular but the area of its cross
section is unchanged as the material is effectively incompressible.
(If the area was decreasing, then you'd have a growing bulge at the
pinch gear -- the volume of material "squeezed" out -- which would very
quickly build up and jam the system. If the area was increasing, then
you'd quickly stretch the filament so thin that it would break.)
But what does change with deformation is the effective radius of the
pinch-gear/filament system. As the pinch gear turns 360 degrees it
would move 2*pi*radius linear units of filament and the volume then
would be area of the cross section of the filament times that linear distance.
Since the area of the cross section is unchanged -- incompressible --
the question then is what is the effective radius we need to use in
the calculation? This radius is smaller for ABS because the pinch gea
bites into the softer ABS filament more than PLA and so
the filament rides closer to axis around which the pinch gear is
turning. Thus, for ABS less volume is fed per revolution of the
pinch gear. And, if you look at the arithmetic used by the slicers,
you'll see them (at least Skeinforge / RepG) dividing by this factor.
So, if you use 0.85 for ABS, then you end up wanting to turn the
pinch gear and additional ~18% vs something with a filament packing
density of 1.0.
Now, that's not the entire story as the filament packing density is
also being used as a bit of a fudge factor for fine calibration as well.
It's being use to account for other issues in the system as a whole.
Dan