That's correct. Kryoflux actually does an extremely low level read of the analog flux transitions on the disk. This is actually below all forms of copy protection (except one,) and therefore isn't effected by them. But the data is so basic, that using it in emulation is problematical at best. With the more recent software & BIOS revisions, it can be written back to floppy (except in very specific situations I'll explain later.) But using it in an emulator requires converting to a higher level format. So, if all you want to do is re-master a disk for use in a physical system, then archiving a RAW dump is all you need. However, if you want to then use it in an emulator, you will need an image format that both preserves the copy protection and an emulator that supports that format.
The one protection method that is actually below the analog flux transitions, is physical damage to the disk. I've only ever heard of it being used on PC disks, but that doesn't mean that other systems don't use it. I also don't personally know of any disks that use it, I've just read about it during research. From what I've read, it is done by creating a pin-point hole in the disks surface that covers one sector.
The failure to re-master that I referred to concerns "flippy" disks. Many 8-bit systems (Commodore 64, Atari 8-Bit, Apple II, etc...) only use one side of a floppy. Many disks, however, had data written on the other side that is accessed by physically "flipping" the disk over. Kryoflux can read these disk in an appropriately modified drive by reversing the transitions read on the back side. However, at this time, it cannot write this data back in the same manner (the reverse side ends up corrupted.) If your curious, the necessary modification allows the drive to step the head below track 0 (to -8 for HD or -4 for DD.) It is also possible to modify a drive to ignore the index sensor, but this will reduce Kryflox's ability to accurately read timings (very important for some copy protections.) Finally, some flippy disks actually had 2 index holes, which would eliminate all need for modifying the drive.