Another example (a similar scene in fact) which I've named
"Where have the colors gone?"
heh
Here are the links for larger pictures, so you can see clearly what's going on.
original JPG
edited DNG
(there is full and nice color to everything - boosting shadows doesn't seem like something too bad, there is both detail and color to shadows in fact.)
edited JPG
(you can see that boosted shadows areas are in fact all purple tinted with practially no color other than that.. ok there's some green. but most of it is kind of pale/purple. boosting vibrance/saturation will bring out nasty casts)
It obvious that I'm exposing to the right and bringing up the shadows in post. It's what I often do when I don't feel like taking HDR sequence (which I find tedious for post processing). The Canon JPEG is all weird when pushed to such an extreme.
DNG editing - piece of cake, everything looks nice and smooth
JPG editing - do something a bit more extreme and all kind of weird stuff start showing up which you try hard to fix (e.g. you need radial/graduated filters for boosted shadows because they act differently than the rest of the picture)
So my conclusion is this: Canon JPG - fine for minor edits, but if you want to alter the dynamic range (remap tones) than it's no good, you need RAW for that, otherwise you encounter some very bad artifacts and pure lack of information in shadow areas.
EDIT: I was quite intentional here to show what are the limitations of JPG are. It's more about tech stuff rather that art and what looks better. In fact I like unedited JPG, but here I tried to demonstrate what would happen if I were to alter that look by somewhat extreme amount.