To quickly clarify: When I make a curry I leave the seeds in, and chop some of the chillis finely (into little rings, about 6 or so) and some coarsely (cut once accross and once lengthways) and I've noticed that its when these are fried for a while in the oil that they create a lovely savoury taste that when it combines with the spices is that particular bir taste everyone is on about.
I know that its the skins of the chillies and not the seeds that give this flavour, and its the frying in oil that releases it.
As everyone knows its the seeds that have the vast majority of the capsicin in them so the skins aren't actually that 'hot'. I think curry houses might not necessarily put in whole chillis with seeds, especially as most of their dishes aren't burning hot but they probably put in oil that has had chilli flesh/skin boiling in it.
If you eat one of the big pieces of chilli skin in one of my final curries it has its own taste but not this one we're on about - thats why I'm sure it passes this on to the oil. Its in the smell as well when they fry, and it changes as they bubble away.
I think reclaiming the oil basically just increases the time that there has been chillis sizzling in it, the more (new) chillies, the better and so the older the oil the better, though I'm sure my idea of a 35 min frying time with one lot of fresh chillies will do the same job... hope someone gives it a go and reports back....