In all lenses, the manufacturers have to balance between foreground and background blur. so generally if the bg blur is v v v smooth, the FG will be a little nervous or have hard edges. what the DC function allows you to do, is decide whether the FG or BG has a smoother blur by adjusting the amount of spherical aberration correction. this is would be very important for portrait photographers and can be used this way.
Example 1. bg is close to subject, nothing in the fg. set the DC setting to blur out the bg. you get a smoother bg, with no penalty cos there's nothing in the foreground.
example 2. bg is far away, maybe some flowers/leaves/props infront of the subject. set DC setting to neutral or more to the FG. like this, the fg is smother and doesnt have that blocky appearance. but must balance so the bg is decently good as well.
I use the 135 f2 AIS and it has fantastic BG blur, but a rather blocky foreground blur. so i can see where this would come in handy. the link below explains it abit better =)
As for sharpness, to my understanding, the lens is optimized to be v sharp from about 5m-∞, and softer in the portrait distances(<5m). its a compromise, you either have ok sharpness at all settings, or v v good sharpness at parts of the focal range. this is prevalent in the 135 f2 AIS which i use. for anything further than 3-5m, i can very safely use at f2 and get superb results. but less than 3m will have to stop down to 2.8 if you want it to be pin sharp.
BUT!! at the closer range, i don't want it to be sharp and i really enjoy the rendition of the lens. so i really don't see a fault there. must remember that there're other factors like contrast, colours and rendition that come into play, not just resolution (sharpness).
can read more at nikon 1001 nights:
http://imaging.nikon.com/history/nikkor/
they have articles about both the 135 f2 AIS and DC versions, and they explain the compromises made in almost every lens listed there. quite a good read. great way to understand what our lenses do better.
