I think it's something to do with the internal sphincter being very tight. From my own dilation and examinations my pain isn't as far inside as initially thought.
Dilation might help loosen up the bands of scar tissue as well in the anal canal. Although I have a bit more pain, it is at least changing something(it's making my residual chronic pain a bit more intense). Also because it's in the exact area where my pain is coming from that has intensified, maybe something will change long term.
After a few months I should know if it's helping. At the moment I can only use one of the smaller dilators, it's about 15mm diameter. Its still quite tight to put in.