As far as I understand it there's a lot more involved than just saving back the IDS dumps ppl sent (me as well ). It's a crapload of stuff with the KIRK engine, generating certivicates and what not else, since it also recreates the keys that are unique per PSP and can't just be copied back from another one (UMD related keys and some more).
Anyway, I'm drifting off.... ;)
Yes, you're right, you can upgrade your PSP from almost every CFW (tested down to 3.02-OE) straight up to 4.01-M33-2, without the need to stop by any other firmware.
The main purpose of this tool is upgrading (and downgrading) as well as the recovering of semi bricks, yes :)