It handles volume requests supposedly and lets you ASSIGN them to directories.
Yes, or mount if there exists a mountlist entry for the volume/dosdriver asked, or deny once, or deny "forever".
I am not so sure about how it handles image MOUNTs.
It doesn't, directly.
You have to use some diskimage.device and above mentioned mountlist entries (DEVS:MountList, DEVS:DOSDrivers/#? or SYS:Storage/DOSDrivers/#?)
EDIT: I had a quick nose in the source code, it makes an unconditional jump to an absolute address early in the code. I don't know if that's all that's wrong with it, could be,
That is just the hack&patch nature of this program, it jumps to that address because that is where it can "wedge" itself in and interfer the "insert blabla" requestors (and it's not really an absolute address is it...)