Don , I particularly like the last 2/3 of the quote from Farrington. When I read his book a year or two, though, I found some of his interpretations to be quite interesting and others to be rather hostile. So I'm not quite sure what to make of him. I may have to re-read his book when I have some spare time... just one more book on the stack!
However, this:
"The more one stresses this the less important the distinction comes to look, since any condition, however steady, of a living thing, must according to Epicurus, be a condition of perceiving: but there is no evidence of a special kind of perceiving or object of perception to constitute ataraxia and aponia. Consequently we should be left with steady long-lasting perceptions over against fleeting ones. It seems simplest just to suppose that when the organism is functioning harmoniously it is always having some form of perception; that since the operation is harmonious the perception is pleasant and without pain; and that is just what aponia is. Ataraxia is the condition when, because of correct views, our expectations are undisturbed by fear, our desires do not pursue empty objectives and our memories are pleasant: this leaves us to enjoy our pleasures unanxiously."
pretty much sums up my understanding of the topic. I think of katastematic as more of a "steady state" whereas kinetic is constantly changing. At least that's how I interpret the terms. Practically speaking, this conception requires some sort of a transition point between "constantly changing" and "steady state": this adds a layer of unnecessary complexity to determining the difference between the two. So from this point of view, defining the difference as "inside v outside" is maybe more concrete, but to me it seems incorrect.
Practically speaking, again, I subscribe to the idea that katastematic pleasure is largely because of correct views. Once you hold correct views you are in a steady state, because correct views shouldn't be constantly changing. (That's not to say that they won't change with additional information, but they are relatively stable.)
Don do you see homeostasis as being a helpful idea in sorting out this conundrum?