Just to be clearm DEQ does nothing to dynamics unless you count slightly raising levels of surrounds. It's Dynamic Volume that affects dynamics.
The "dynamic" in DEQ means it scales its frequency corrections to the volume you're listening at, so that it should never be necessary to turn it off, at least with movies. When you reach reference level, DEQ does nothing. As you reduce from there, DEQ increases the bass and treble to accouont for how humans hear.
Because there's no such thing as reference level for music, the system is a less perfect fit for music. Basically, it causes DEQ to make less correction at any given volume control setting than it would for movies. Works well, IMO.