first of all, get rid of following concept:

SV* test( SV *a, SV *b ) {
    if( SvREADONLY( a ) )        // Readonly? Take a copy.
        a = newSVpv( SvPVX( a ), 0 );
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What do you do here? Under some conditions you will creat new SV under other equivalent conditions it will not. What code below that should think of a - should it free it or not (in terms of refcounting - should it rely refcnt inc or not?)

Hence your uncertainity on whether refcount it.