A JPEG is 8-bit. RAW formats are normally 12-, 14- or even 16-bit and RAW processing software handles them at 16-bit.
Therefore you’ll need to shoot at least 16, possibly up to 256, JPEGs to match the potential *smoothness* of tonality from an HDR of two RAW images. The normal numbers of 2,3,5,7 frames won’t cut it.
And, of course, you can apply the significant tweaks you want to RAW files *before* using either them or JPEGs for the HDR process. If you have them.
(I’m afraid I also see “Water Reflections” as a truly *horrible* example of tonemapping: there’s nothing worse than huge areas of highlight that’ve been mapped down to a grey splodge – an anti-halo – darker than their surroundings in the name of a broken local-contrast-”enhancement” algorithm. The first shot gets away with that in the sky as the blend is smoother.)
Although I agree with using JPEGS to create HDR images in Photomatix Pro, I still prefer to shoot RAW files. You touched on the reason; there are a plethora of issues I may wish to correct later when I upload the images to my computer. I’d rather have the data necessary and not need it than vice versa. I have plenty of Hoodman RAW cards that are quite fast, so speed hasn’t been an issue for me.
Also, I’d disagree that 7-exposures is overkill. Most of the time, I think a bracket of 5-exposures is suitable, but there have been situations where I’ve shot 9-exposure brackets to get control of extreme highlights and shadows, and I was glad that I did it.
I guess it all comes down to the photographer’s preference and the needs of a given scene.