I started drawing a diagram of Baglihar and then I got it. Didn't quite tidy up the diagram, though.
Only in one instance of objection was Pakistan after a smaller dam. In all other cases, it is not the amount of storage that worries Pakistan. It is India's leeway in varying the flow of the river. Notice that India would have to violate the IWT to play games with the water flow; but assuming that India wants to violate the treaty, certain dam design characteristics make India's task easier.
Let me explain: (all elevations in meters above sea level).
(1) The dam, when full cannot exceed 840m water level without risk to Pul Doda town.
(2) India estimated the worst case flood to be 16,500 cubic meters/sec. Pakistan estimated it to be 14,900 cubic meters/sec. The Neutral Expert accepted India's number.
(3) Therefore the dam must be capable of discharging that much water safely. Pakistan's first demand was that the dam not have gates (i.e., the flood water must discharge by overflowing). But for 16,500 cubic meters to discharge by overflowing, the water level must be 12m above the top of the dam, so the dam maximum height can only be 840m - 12m = 828m.
The Neutral Expert rejected this as reducing Baglihar's hydroelectric potential too much and also as being contrary to modern engineering. All modern dams with more than 14,000 cubic meters/sec discharge have gates.
Gates, by providing an opening at a lower level in the dam, allow for sufficient discharge without overflowing the dam.
(4) Now, the lower the gates, the more the volume of water India can play with. E.g., if the gates were at the base of the dam, then the entire reservoir can be discharged. Or India can empty the reservoir to the bottom sill of the gates, and then close the gates and accumulate water not letting any water downstream. Again, if the gates were at the bottom of the dam, India could empty the reservoir and then accumulate some 400 million cubic meters of water, not letting a single drop reach Pakistan. So Pakistan wants the gates as high as possible.
The Neutral Expert found India's design OK, but actually wanted the sluice gates lowered by 8 meters (contra Pakistan) for the safety of Pul Doda town.
(5) The Dead Storage (the water India cannot use) is some 385 million cubic meters. Pakistan wasn't worried by that. Pakistan wanted the live storage - the pondage - to be 6.22 million cubic meters. India's calculation was 37.5 million cubic meters. The live storage is calculated by the formula in the IWT treaty, that it can be twice the amount needed to level out the fluctuations in the demand for power. I.e., when during the time of day when power demand is high, the power intake will use more water than when the power demand is low, and there must be a buffer to smooth this out compared to the slower rate of change of river inflow.
Notice that the larger the pondage, the more India can control water flow, i.e.., India can start from a position at dead storage level, and withhold water till the pondage is filled.
The Neutral Expert reduced the pondage to 32.56 million cubic meters, and raised the dead storage level by 1 meter to 836m.
The dead storage increases to some 390.39 million cubic meters. (Again, dead storage is not what concerns Pakistan).
(6) Likewise, the lower the power intake the more leeway India has to play with water flow. India had the intake at 818m, the Neutral Expert raised it by 3m. Note that there are engineering reasons for having the intake sufficiently below the surface. India's design had the intake 17m below dead storage level; the Neutral Expert changed that to 15m.
(7) India had the crest of the dam 4.5m above the full pond level. This is a safety margin, to be able to handle e.g., the possibility of a malfunctioning of a spillway gate - the water level will rise somewhat till the increased water pressure causes sufficient discharge from the remaining gates, but the dam will not overflow.
The Neutral Expert reduced the margin to 3m, so the dam crest is 843m above sea level instead of 844.5m. But remember, he also lowered one set of gates from 808 to 800m.
Pakistan's concern here is again, should India decide to violate IWT, then 844.5m dam gives more storage than a 843m dam.

and I must link to flickr, so
http://www.flickr.com/photos/macgupta/4 ... 1/sizes/l/