I didn't "go off the cliff" anywhere.
1) "So if you have a signal that features multiple peaks all about the same amplitude how big is the S-Meter error?" What "error" are you referring to?? There is no "error". In the case you describe (with multiple equal peaks), the S-meter should read the same regardless of whether there are one or a thousand peaks. As I've stated unwaveringly, the S-meter should report the highest value detected anywhere in the passband, no more and no less. What part of that rule is not clear to you? It's clear to me by your very question that you don't have the slightest grasp on that simple rule.
2) "Take an NFM signal modulated by a sine wave. Run up the modulation from zero until there are three spikes showing within the NFM bandwidth that are all the same level. What is the correct measurement? One of the peaks or the proper sum of all three?" What is this "proper sum of all three" value you mention??? Be specific. Your prized "sum" value remains undefined.
3) "Now continue running up the amplitude of modulation into the BFM realms with the signal spread out over 200 kHz bandwidth. What is the correct S-Meter reading?" What is even the point of that question? The S-meter couldn't (and shouldn't) care less about bandwidth.
4) "Does that reading change when the announcer pauses for breath? Should it?" The simple answer is "no", at least not for a transmission with a steady FM carrier, given that by definition the modulation on any FM signal should never exceed the strength of the carrier. Once again - the S-meter should only report the strongest signal measured anywhere in the passband. For an FM (or AM) signal, the strongest signal will always be the carrier.
You're asking me these questions, but you (or anyone else) can easily see the answers to every one of those questions by simply opening a session of SDRC and click on any BCFM or BCAM station. If the carrier is steady then the S-meter reading will also be steady, regardless of the amount of modulation and regardless of bandwidth.
If anyone has gone off a cliff, it certainly isn't me!