The conversion of SBD to STEEM - regardless of the size - does not change the debt ratio.

No time to look right now, but this can't be right. If someone managed to convert 100% of SBDs to STEEM, the debt ratio would be 0.

Conversion leaves the virtual_supply the same, grows the current_supply, and shrinks the current_sbd_supply, so all else being equal the debt ratio would shrink. However, there are downstream effects on the price of STEEM, so all else is not equal. Still, there must be some scenarios where the debt ratio would decrease.

Update: Not sure when I'll have time to look at this more carefully, but here's my current theory. When the debt ratio is >= 10%, it's always exactly 10%. That's what the haircut threshold accomplishes. So, as long as the STEEM price is below the haircut threshold, converting SBDs won't reduce the debt ratio. Instead -- as you noted -- it merely lowers the haircut price. However, once the STEEM price breaks above the haircut threshold it should(?) be possible to reduce the debt ratio by converting SBDs. (just a theory... I haven't run any numbers.)