I believe that _is_ what is written.
The first part of the paragraph says that in order to be allowed to have reduced conductor sizing, the conductors must either be service conductors or feeder conductors that supply the entire load of the dwelling.
So if a feeder only supply part of the load of the dwelling, then you don't get to directly apply the reduced conductor sizing.
But then there the sentence about 'not be required to have an allowable ampacity rating greater than their service-entrance conductors'. I read that to mean that once you have permission to use a given reduced conductor size for a given breaker rating, you do not have to increase conductor ampacity for feeders of that same breaker rating, even for feeders that do not carry the full load of the dwelling. For the specific case of feeders with the same breaker rating as the main, you get to indirectly apply the reduced conductor sizing.
So, if you have a 400A service (using reduced conductor sizing) and then have a 200A feeder for part of the load, you would need a full size 200A feeder.
But if you have a 200A service (using reduced conductor sizing) and then have a 200A feeder for part of the load, you get to continue using conductors of an ampacity equal to the service conductors.
Just to be clear am agreeing with texie's interpretation.
-Jon