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I always thought that Nintendo chose to turn the sprites off when the game is paused because a similar effect happens when you turn a Game & Watch (or other LCD-based game) off; the "sprites" all disappear, but the backdrop (which is a picture physically behind the screen) remains.
Turning sprites off is just one of the lazy ways to make an obvious change to the screen. Changing a bit is faster than anything else that could be done, such as dimming the palette (without using the color emphasis bits) or writing the word "pause" somewhere. I don't think there was a lot of reasoning behind this decision.
I have uploaded a new revision of the DK disassembly. There's not much left to understand now, apart from the audio player and some details of the flame enemies logic.
