I think the entire point of DSD256/DSD512 compatibility is to sample it yourself by software really. Next to no sources at those rates. Personally I wouldn't bother but there's a literal horde of people proclaiming it the next best thing since oversampling.
It is very handy for working around shortcomings in those resource constrained DAC chips that have pathetic digital filters and poor modulators. For SDM DAC, the modulator behavior and reconstruction filters are one of the defining factors how it sounds. Plus the conversion stage architecture.
But one cannot really expect that much from a DSP that sits on a $10 chip in close proximity to very sensitive analog parts and usually has other constraints such as that it cannot require heat sinks or active cooling.
I'd rather see DAC chips as they used to be in the R2R days. Dedicated chip that does only one thing as well as possible - convert digital samples to analog, as-is. Without DSP. The DSP can be then external, like it used to be in the old days. Like SAA7220 + TDA1541A. But the current trend is just price (BOM) driven.
If there would be standard to send multi-level SDM to a DAC, I would by all mean utilize that. Such just doesn't exist (yet).
99% of DSD is DSD64, yes. A pity / failure of early DSD for sure
It is as much failure as RedBook. You need to do upsampling for both to help the reconstruction.