"If so, that oxygen is what determines the fuel demands, so why can't the stock computer process that info? I don't see how altitude/temp issues would be a more significant concern than without the compressor."
Because at sea-level with a certain X-CFM flow-rate being compressed to 7psi may end up being the same X-CFM flow-rate across the AFM being compressed to 5psi at 5000ft. The lower-density air would
still be read as the same volume and flow (X-CFM) by the AFM, but it will only contain 80% of the oxygen as before. The lower-density mixture will also be compressed to a lower boost-level. But the AFM doesn't know any differently.
Well, there
is a slight change in the AFM's flapper door's due to the lower kinetic-energy of the lower-density air, but it doesn't fully compensate for the reduction in density. Only an altitude sensor can provide the additional data for proper compensation.
The other issue is one of spatial displacement that causes a time-delay. The exact piece of air that the AFM is measuring, is NOT the same piece of air that's being compressed and not the same piece of air that's going into the engine. This cause a time-delay where the DME is playing catch-up to the actual air-flow conditions.
When you first step on the throttle under WOT, the increased air-flow is not immediately picked up by the AFM. That's ok, because an acceleration-pump enrichment algorithm is provided by the DME based upon TPS-angle and velocity. However, when you let off the gas, the throttle-body as shut off the air-flow going into the engine, but the compressor and air-column is still moving pulling air past the AFM. The computer thinks air's still flowing when it actually isn't. It takes a little time for the air-column to slam into the closed throttle-plate and back up out too the AFM and stop air from flowing. This cause a rich-spike, flames out the tailpipe and a little pop when you let off the throttle quickly.
This is just fuel, we have to address ignition. Increased air-flow density ffor the same volume will cause increased heat. To have ignition be a couple degrees away from the knock/detonation limit for safety would require some way to adjust igniton away from stock values.
"If so, that oxygen is what determines the fuel demands, so why can't the stock computer process that info? "
"The stock DME can handle that up to a certain point, I think someone said ~5psi for a stock setup."
AZN is correct. Now, if you're going to be boosting the NA, you have to deal with its increased flow rate. The stock AFM has only a certain maximum flow-rate it can measure before the flapper-door is fully open and the voltage-output is maxed-out and fixed at around 4.6-4.8v. If you use say... 5-6psi boost, the AFM will most likely be maxed out and send a fixed signal from 3500rpm onwards. It will then trace the red line through the fuel-map instead of the stock green one:
So basically once the look-up point on the 3D map is smashed against the edge of fuel-map due to the AFM being maxed-out early, your fuel-values will be fixed on whatever's programmed into the chips. So 7psi boost will get exactly the same amount of fuel as 4psi boost resulting in a lean condition. Using 9psi boost will get even leaner because the same fuel will be injected, but 10% more air is being pushed through. You can't even use a piggyback signal-massager like the ARC2 because increasing the output voltage once it's maxed-out against the edge of the fuel-map will do no good. It will just hit the edge of the maps earlier at 3000rpm instead of 3500rpm.
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Now if you were to get larger injectors, you'll be way, way too rich in off-boost conditions like idle and partial-throttle/mid-range cruising. If you were to get 50% larger injectors, you
MAY have enough fuel under full-boost of 7psi, but you'll have 50% too much fuel at idle and partial-throtle, resulting in a 8.0:1 fuel-mixture. The car won't idle or run very well with that much fuel.
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* it's actually more complicated than this, but this is a rough outline to illustrate the concept.