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do cables really stretch, or is it the outers that compress?

My own idea for the 'ultimate' rim brakes is to take the arms of the EE brakes from the main pivots down, build them into the forks and drive them with hydraulics. The only reason conventional brakes need so much brake-drop adjustment range is to accommodate forks with different tyre clearances. Build the brakes into the fork and you can probably get away with no drop adjustment at all, leaving little more than the pads in the air-stream. The pipes would run down inside the steerer, and i'd build a progressive advantage linkage into the levers, where it can be designed to recalibrate automatically if it gets too close to bottoming out. (A good reason not to build progressive advantage linkages into cable brake levers is that the high leverage bit would be quite harsh on the cables. I think hydraulics would tolerate this better.) You might need to stiffen the forks a bit, but that should be more efficient than providing an entirely separate structure. I'd worry a bit about how brake heat is handled.

The rear brakes would be built into the chain-stays, as they are already pretty chunky.

dude the entire point of hydraulics is that you can manipulate the mechanical (bit of a misnomer here) advantages simply though the alteration in the size of the pistons at the action end and driving end of things. no moving parts are needed. the draw backs are the seals.

the advantage to cables is that they are reliable and easy to work on. They draw back is that they are mechanical and require moving parts.

you're taking the worst of both worlds and combining them.

also a progressive advantage (falling rate) makes very little sense, as the actual movenent in the system once the pads hit the rim is very tiny; whatever direction you make the rate change go, it's not gonna change much once things start to matter.

Rate changes are commonly done on rear suspension so that they never bottom out, so to speak. The advantage approaches zero and the shock is never sent through it's entire stroke. This gives a bottomless feel to the end of the compression and is easier on the shock. this works because the system is dynamic. Brakes are a static system, largely.