^^ pretty much this. It certainly deserves more thorough testing.
I haven't done any changes to the interface I suggested earlier. Instead of controlling updates with new parameters or functions, I reduced the amount of updates triggered from within Register/UnregisterFilter by delaying them. One can never be 100% sure, but I think this is unlikely to break other add-ons.
Second change was a much deeper cut (and much more needed). I removed SetInventoryFilter (which was the culprit, always expanding the chain of filters) and SetFilterByFragment calls from RegisterFilter. Instead of hooking
additionalFilter for the proper inventory from RegisterFilter, I hook it once from InitializeLibFilters in tables where it should persist - that means backpack layout fragment's layoutData table for BACKPACK, and the inventory table itself for BANK and GUILDBANK. This change might break something in ways I can't foresee.
I didn't have time to test these changes in actual gameplay yet, and I usually prefer doing that for about a week before releasing anything but the simplest changes. Plus the only add-on with libFilters I use is AF; I installed Item Saver only because of this thread.
Ah, now I see you've put it up with big green credits and a less-big red warning... perhaps you should've done it the other way around - big green warning and less-big red credits! jk
Well let's see how many users try it out and return undaunted.