Does leaving Active D-Lighting on when shooting RAW files damage the RAW files?

You are going to have less shadow exposure in your raw file, but it's only up to maybe a half stop. Less exposure means more noise. I was always able to get good results with Capture NX and NX2 with my D300 raw files. If in doubt, leave it off.

why will you "contaminate" (sorry, can't think of a proper word) the RAW file with the D-Lighting on? it's more fun to have the full freedom on post-processing by starting from true scratch by leaving it off. but then again, it's also fun to experiment.

Active D lightning might change exposure a little bit to optimize DR, it also applies a custom curve to the NEF file, the ADL curve can be turned off in NX2 at any time. See page 180 of D700 manual.

Fella's Correct me if I'm wrong, but the d-lighting settings (and just about every other picture control) don't apply to the raw file.
Sure Capture NX will go ahead and apply those settings for you on import, but if you import into something that doesn't recognize the camera's processing settings (such as Aperture or Lightroom) I don't think any of that stuff gets applied at all.
As I understand it, the NEF file, as it's shot without applying the extra meta-data of capture modes, is pure sensor information, nothing else.
Am I mistaken?

Hi Leigh, you are correct. The only things that affect raw data are Exposure includes flash, and ISO. So shutter speed and F stop. Regards Peter

According to Nikon's tutorial videos, D-lighting acts by reducing exposure and then boosting the shadows by applying a different tone curve. The tone curve obviously does not affect the RAW data, but reducing the exposure will. That's according to Nikon.

However, the few times that I've used auto D-lighting I've still had blown highlights from the stupid 3D matrix metering unless I manually applied some exposure compensation. So much for D-lighting improving the dynamic range then! And I must say that I didn't notice any exposure reduction at all from using D-lighting.

The D700 has one of the best dynamic ranges of any DSLR as it stands, without using D-lighting. So based on my own experience, my advice would be to turn D-lighting off, watch out for blown highlights and compensate if necessary, let the shadows fall where they will and if they need boosting then do it in ACR - or NX2 if you must. There's plenty of shadow leeway down to -11 stops from the highlight limit, and with very little noise. OK, so you can't see it without applying a very unusual curve, but it's there for the taking from your RAW files.

D-lightning is different from Active D-lightning, D-lightning was a feature of older cameras and it is only a tone curve that raises the shadows and lowers the highlights. Active D-lightning is a feature of newer cameras, it can alter exposure by 1/3 or 2/3 stops to avoid blown highlights and then applies a custom tone curve to optimize DR. In both DL and ADL The RAW data is numerically intact and the tone curve is applied during conversion, When ADL/DL is enabled NEF files are tagged and Nikon sw can read this tag and apply the correct tone curve. Adobe sw cannot read this tag and therefore ADL/DL is ignored. Since DL is just a curve it can be set off in the camera and later applied in Nikon Capture if desired, but ADL has to be set in camera and cannot be turned on later. This is not just due to the fact that ADL alters exposure but also because in some models like D700/D3 there is an "auto" mode which records a custom tone curve optimized using scene information which is gathered when camera records the photo.
I disagree with comments that ADL is a useless feature, I have it set to auto in my D700 all the time and I always get very good results. Of course ADL is not a guarantee for good exposure, the photographer always needs to override exposure in extreme cases if necessary, but ADL on top of correct exposure delivers very good results here is an example:

Yes I was referring to Active D-lighting, since I wasn't even aware of the earlier version. However, all I see in that example is that the shadows have been boosted with a change of gamma. That could be done just as well in ACR or Photoshop from a normal 14 bit raw capture. The highlights still look EXACTLY the same with no evidence that the exposure has been changed at all.

And are you saying that your D700 gives good exposures in the majority of cases? That's not my experience. When left to its own devices the programmed matrix metering blows highlights on a regular basis, regardless of lighting conditions, and I find that dialling in -0.7 stops is the norm rather than the exception. Sometimes more than 1.3 stops correction is required.

So, err, how come that bystander posed in the exact same position while you fiddled with the menu to switch ADL on and take another shot?