OK, finally got time to try it.
I really like using the search restriction and the marking.

Setting up the search restriction by hand is easy, although having it done for me would be nice.
One nit: the duplicate groups are random (it seems) in terms of title order. They jump all over the place. Next group bounces from Collected Essays to Xenocide to Collected Poems. It would be nice if the groups were ordered in ascending title sort order, where the lowest title in the group controls the order. Sorting by duplicate group would help because the flow will be 'down', but then the titles will be sorted oddly if a book is in more than one group. I confess that I am not sure what is best here. (You know things are going well when I start mentioning this kind of thing.

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In terms of behavior: clearly switching to 'highlighting mode' should set the search restriction and the highlight_only flag. The issue is the one you mentioned -- when does the highlight_only flag get reset to what it was? I am tempted to put a copy of that checkbox back onto the main gui so that the user can easily see it change and can easily reset it. However, real estate is precious, so I would propose a very terse label, something like "H/O" next to the checkbox with a tooltip that tells the user to see the configuration dialog for more information.
Showing duplicate groups is close to useless if the highlighting flag is set unless the search restriction is set to not_duplicate. Is there a way (will there be a way) to see the books in their non-dup pairs? I would like to select a book and have that books non-dups highlighted. Otherwise I have no idea what the pairs are, at least as I can tell.
I think this plugin is very nice. Once it is stable, I would argue that it be merged into calibre itself.