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Brad - you're a rascal you are, to much listening to that nasty loud guitar music.
JCD - estimate your timing error, do the math(s) for the lowest and highest numbers - there's your possible error.
From what I have read about different brands of dyno, you probably will be just as accurate, plus you can calculate right down to tickover(ish) revs if you want
It is mathematically sound. I don't think timing varations will effect too much on the calculations. Unless your reaction time is really poor. But even then, if you do several runs it should average out pretty close.
The best you could hope for is about a .25sec reaction time, so accuracy on a 5sec time measurement would be about 5%.
For a peak CHP measurement I prefer to use trap speed and launch weight. So long as you can get consistent launches, this will work fine and you can even normalize results for weather conditions (you realy can't compare data from week to week without normalization). I think this method will be good to 1% or better. I've compared this method to chassis dyno data taken 15min apart and, assuming 17% DT loss (with my A4) the numbers for peak HP were dead on.
If you want a torque curve a chassis dyno would be the next best thing, though it will only give around 1/2 the curve if you have an A4.