Here is an example of the situation that you have described in your interesting email. A set of steep 4 by 2 foot open rectangular channels flowing into a set of flat 4 by 2 foot open rectangular channels. You will see the main difference in the model results for KEEP and DAMPEN in this network in the link between nodes mid4 and mid5 because with the KEEP option you can get more flow through the link. If you have all four dynamic wave terms then the flow depth will generally be lower for the same inflow. At the upper end of the network the results for both the KEEP and DAMPEN options are the same because the upstream and downstream cross sectional areas are equal which means the dq3 and dq4 terms are zero and only the dq1 and dq2 terms are operational.
"Then how does SWMM handles hydraulic jumps in the DAMPEN and KEEP option when water flows from a steep supercritical flow pipe to a mild subcritical flow pipe? Does SWMM just extend linearly the final HGL from the subcritical flow pipe to the upstream supercritical pipe until it intersects with the normal depth HGL of the supercritical pipe?"