I don't know if anyone is still confused on this issue, as it seems we've settled most debates, but this was still bothering me until last night, so I thought I'd chime in with what I've found. This post is long, but I wanted to get down to the nuts'n'bolts, both for my own compulsive need to understand and so others + newcomers can know exactly what's happening.
I feel like I've learned an absolute ton in this thread, and I have so many of you to thank for it.
My best color results have indeed come with PS4's RGB set to Full, and the TV's HDMI Black Level (HBL) set to Normal. A big thanks to others for pushing me to investigate this further.
As best I can tell, here's the definitive answer on why this is the case:
When the KS8000 detects the 2160p - RGB resolution from your PS4 Pro, it enables the HDMI Black Level setting to allow customization of the color range. I believe this is because, even though the PS4 is set to 2160pRGB, there is some content (movies and shows) that don't leverage the full 0-255 RGB range. They're programmed at 16-235, instead. So you, the user, gain the freedom to match things as appropriate--the TV's HDMI Black Level setting becomes enabled so that you can tailor the TV's interpretation to match the content.
If you force your PS4's RGB setting to Full (0-255), then you want the TV to similarly display 0-255 (the "Normal" setting). Because HDMI Black Level setting only becomes selectable when an RGB source is connected, we can interpret the Normal setting as "Normal for an RGB output, or 0-255". "Low," meanwhile, means "a Low range for an RGB output, or 16-235".
PS4 Full = HBL Normal
PS4 Limited = HBL Low
PS4 Auto = TV Auto (Low)
^^ this last one is important, as my testing indicates PS4 Auto will always default to a Limited color space, hence why I thought "Low" looked better at the time. It did, because 16-235 seems to be the PS4's default on Auto.
Once I thought about the way these numbers and settings interact, I started to understand why this works, and why mismatches caused poor picture.
If the PS4 RGB is set to Full (0-255) and my TV is set to Low (16-235), any brightness value reported below 16 gets crushed as "pure black". Those subtle gradations of black, from 1 to 16, get lost and flatly reported as 16, which is the theoretical minimum at that setting. The same thing happens on the high end, with whites getting crushed above 235. In-between, things seem more contrasting because of that compression, but it's not accurate, and both the high and low ends lose detail. I noticed this in both COD:IW and Rise of the Tomb Raider.
In the reverse scenario, where PS4 RGB is Limited (16-235) and HBL is Normal (0-255), a brightness value of 16 reported by the PS4 is meant to look pure black. But the TV interprets it as a dark grey. Voila -- the whole picture gets washed out, with paler colors than expected.
Then, PS4 = Full / HBL = Normal and PS4 = Limited / HBL = Low should look near-identical. This was also my experience in testing.
In theory, for games (which are developed using PC RGB monitors), Full/Normal should be a slight, near-imperceptible improvement over Limited/Low since it is able to make use of 36 additional gradations of brightness.