I've been reading up on this project as well. From my understanding, once you have the Kyroflux, you can create the IPFs. The "use this to create a file and we'll send you the IPF" thing was before they actually started selling them, or releasing write support. IF I understand correctly. Big if.
I can say that I've seen IPFs of PC games showing up on the torrents. There is no CAPSDI releases for PC/Atari/etc (just Amiga), so to the best of my knowledge, there isn't an organized way to have gotten these images. Either (a) you created them with your Kyroflux, (b) you had them created by SPS, or (c) you found a file repository that I haven't!
***** Edit
Ignore the first paragraph. After re-reading several things, it appears that the Kyroflux hardware and software only produces what SPS calls a "stream" file (and a sector-based file suitable for use in emulators, such as .ADF). Then you submit the "stream" file to their team, and if they determine that it's an actual original, good disk image, they send you back an .IPF which can then be written with Kyroflux.
I don't see any data indicating that the stream file will be writable by Kyroflux software, and as SPS donates their time, the return time on receiving an IPF is indeterminate (and possibly never if they deem your file as "bad")
Though I haven't looked through all of their forum yet, I haven't seen where they say that they will send you an IPF of a "good" disk to replace your "bad" stream file, though their goal is to provide IPF images to "legitimate" copyright holders.
While I salute their efforts and their dedication, and I get that they donate their time for free "for the love," it does rub me a bit that SPS get to keep (and ostensibly use) all the IPF images even to software of which they have no legal right to have. That's where I have a problem with their moral code - they're skirting the letter of the law to begin with (if they don't own the actual software, they have no right to KEEP a copy of the IPF after they've made it for the "customer" who sent in the stream files), yet they don't want to come on over to the other side completely and just release all the IPF images anyway
I mean, I get WHY they do it - they want to avoid legal action that would shut down the project... it just rubs me, as I may never get access to replace my own originals should they go bad (or if they are already bad), nor will the "warez d00d" in me get to add more files to my file hoarding
CAPSDI exists and distributes Amiga images.. as a PC/Commodore guy, I only hope that the users get organized enough to do something similar for those systems (and Atari 400/800/ST, Apple II/Mac would be nice too..)
All that said. I still want a Kyroflux unit.