"But in PvE, as DPS, there should never be a situation where you need a 90% damage reduction for 6 seconds at the expense of your DPS for that period."

I'll echo what the others who responded said -- there are a number of places where Dispersion is a net DPS increase. Notably, during Unchained Magic in Sindragosa and during spores on Festergut. (I'm not so sure I'd play around with it with Blood Beasts, but to each his own.)

The main thing that I have to add is that you can -- and often should -- cancel out of Dispersion before the six seconds is up if it's being used for raw survivability. It's handy to make a simple dispersion macro so you can click in and out of Dispersion with the same button (I just pulled this from Arena Junkies):

#showtooltip Dispersion
/cancelaura [modifier:alt] Dispersion
/cast Dispersion

"But how do you justify including a survivability talent when that's clearly not even a remote consideration in the rest of your analysis and you reject its use as mana regen?"

Oh, survivability is definitely a consideration in the analysis. I admit my main focus is maximizing damage, but I always keep the following in mind: survivability = fewer deaths = more lifetime damage done.

If you want to push survivability a bit further, I'd recommend that a shadow priest who does a lot of 10-man raiding without a disc priest strongly consider the benefit of Improved Power Word: Shield. Self-shielding is very helpful for Saurfang and LK.