You've failed to consider the way that digital audio works. If you have a 16 bit audio file, each sample can take on 2^16 values. If you reduce the volume in software, then each sample of the audio stream can take on fewer than 2^16 values. In the extreme case, you could reduce the volume in software so much that each sample can only take on a tiny number of values, in which case the audio will probably be unrecognizable.
Yes I'm well aware of that but that isn't what dynamic range is referring to in the above. The only thing you affect by reducing the volume in a digital signal is increasing the noise floor, or decreasing the signal-to-noise ratio. 16-bit audio already has a noise floor well below what a human can hear for a recording which has a "normal" volume as you might find on any CD. On top of this, when you use replaygain in your audio player, the digital volume adjustment is applied to a 24bit signal, and Windows (or whatever OS) has a 24bit or 32bit float signal path, and then most or all DACs are 24bit (for example newish Realtek integrated audio). So it really makes no difference to effective SNR either.
