Does this give you the ability to do something like this?:
1.) A guard sees you while sneaking.
2.) He pursues you but you turn a corner and hide in the dark.
3.) Guard turns the corner but figures you've escaped because he can't find you.
So basically, is it possible to reenter sneak mode after being out of the line of sight of the person pursuing you?
No it does not. It only affects everything leading up to the detection event. There are other mods that effect what happens afterwards.
The way the AI works is that after you attack someone, in addition to all the bonuses they have to see you, they only lose track of you if the detection level drops below -50. On top of that, depending on how aggressive they are, just because they lose sight of you doesn't mean they will stop hunting you. For example, if you shoot someone with a bow at long range, and you are at -50 or lower, the person may come over to your area to find you. As they come closer, they have a better chance to detect you, and if they get too close, the detection level will most likely rise to above -50 and they will spot you. The idea is that they will scour the area looking for the person who just shot them. This "hunting" period only lasts for a certain amount of time, but can be for a minute or two I've noticed.
I tested this out in a bandit cave with interesting results. Shooting bandit bowmen at a distance was a piece of cake because they prefer distance attacks, and so rarely come running over to where the attack was (although they would still do that some times). Attacking other bandits always asked for trouble. I pretty much could only get one shot off, and they would chase me down. Because SDR is more realistic in terms of them being able to see you, it is REALLY hard to shake someone off now. You pretty much need to plan as follows:
1. Figure out your perfect hiding spot
2. Figure out a totally different attack spot
3. Attack from spot 2, immediately run to spot 1 if they can't detect you (and it better be fairly far from spot 2)
4. Cross your fingers.
However, there have been enough requests along these lines that I am considering including the "detection minimum" variables in the next release, and maybe reducing them down a bit to help compensate a little for all the other adjustments.