You're right, of course, and this is different than standard sway bars that are a simpler U shape. But I still feel like the center point of the twist stays fairly static. While one side arcs upward, the other arcs down, leaving the center point between the two brackets pretty much in place. When both sides cycle together (like when landing a jump), the whole arm will travel in that arc that you drew, but when articulating the twist we're both describing centers at the contact point of my tire. I've only ever jacked my truck up from the axle, so I don't know what the geometry looks like at full droop or on the bump stops, but I just try not to go airborne too often.In this case it's not the twisting motion that matters, though (as in articulation). If you hit a bump dead on and force the suspension to cycle, we need think about where the pivot points are and where anything outside of those pivot points will arc. The center of that pivot line is at the KDSS bushings, meaning the bit that sticks out will rotate and want to return to center, where the tire lives. It's obviously a small amount (I ran a 265/70/17 in there for a while, and only experienced the wear you did) but I won't say it didn't contact and does not contact more than it did. Here's a s***ty paint drawing:
View attachment 3796933
I think it's fine, but it's something to think about.
FYI, I'm running a 265/70R17 Goodyear Wrangler under my rig on a factory FJ Cruiser wheel. I have a 10k mile Wildpeak that I'll hopefully be putting under there once I get a new set for all four corners. It didn't fit at full diameter when new, but now that it's worn down some I think I can jam it in there.