I made a another batch last night (exactly the same as posted recipe) but with the following modifications
used normal potatoes
added 1 x red capsicum pepper
added 1 x carrot
replaced 25ml paprika with 25ml MDS Kashmiri Mirch
reduced oil from 500ml to 350ml
Followed the recipe cooking times exactly. Results were a thicker gravy. Oil did not separate. Tasted sweeter and creamy than standard recipe. No dominant taste. No bitterness. Much more flavour. Slightly redder colour than standard recipe.
Oil did not separate after the normal cooking time. I assumed this was due to the extra "thickness", so I added another 1 litre of water to thin it down. Returned to boil, reduced to gentle simmer for another 10 minutes during which time the oil started to break at the surface. After resting an hour, there was the normal dark pool of oil covering the surface.
I'm reasonably happy with the results and there is definitely more flavour to the gravy. Next time, I will revert back to waxy type (salad) spuds as I'm now convinced that this does influence the base viscosity which in turn prevents oil separation.
SnS ;D