Target painters and their effectiveness on large targets

My understanding of the way missiles in EVE Online work is that if the signature radius of the target is lower than the explosion radius of the missile being fired at it, then the damage of the missile is reduced, and vice versa, if the sig radius is bigger than the explosion radius, then the damage is increased. This means that big missiles like torps and cruise missiles are not as effective against frigates as they are against battleships.
Assuming that my understanding of missile mechanics is correct, shouldn't target painters effectively increase the damage a missile does to a target? Even with the stacking penalty that two of them get for being on your ship, you'd still get a sizable damage increase because their sig radius has been increased. Furthermore, the increase in sig radius should also translate to better tracking for turrets, right?
I'm trying it out right now, and I am noticing an increase in overall DPS, but at the same time I just completed Missile Launcher Operation V and Cruise Missiles IV, so I can't tell just exactly how much of this is due to the TP, and how much of it is due to the skills. Could anyone lend a hand?

You are incorrect on one point. If sig radius is equal to or grater than your explosion radius you do 100% of the damage. If it is smaller it is reduced.
This means that any sig radius above the explosion radius is doing you no good.
The actual formula is:
Damage = Base_Damage * MIN(MIN(sig/Er,1) , (Ev/Er * sig/vel)^(log(drf) / log(5.5)) )
Where sig = ship's signature vel = ship's velocity Er = Explosion Radius of missile Ev = Explosion Velocity of missile drf = Damage Reduction Factor of missile
The log function is the natural logarithm, to the base e, often denoted as ln.
The 5.5 in the equation is the hidden missile attribute "oaeDamageReductionSensitivity" which you can see in the QR SQL data dump (can also see it in tools like EVEmon).