I was looking over the Rank Analysis again and noticed that it mentions that fighting Mendez resets the rank along with a couple of other bosses. So all the damage we take on the lift only effects the Mendez fight, right?

Ok that makes sense. Also in Alan's Segmented NG+ GC NTSC run he doesn't take any damage in the Water room but still was able to kill the red zealot in 3-2 and I can't figure out why. Every run I've done I usually have to heal at least 2 full time in there to get the DA to the right spot for me.

His 3-1 His 3-2

@Dan, you mentioned that there was something in the rank analysis guide about resetting the difficulty that I'd never seen before. I did some tests, and made a revision based on the results. As far as I know, at no point during the game does the rank reset.

based on all the signs of high DA in seg runs it's safe to say the only thing the game ever resets is full health at 3-4 end

The DA resets after Salazar. Maybe a couple other places, but Salazar I know for a fact off the top of my head.

On gamecube, at least

Doesn't on steam

On gamecube it isn't at the disc change, it's directly after you leave the Salazar room. It makes no sense.