i may be too late with this, but i thought i might be able to help. you really don't need the "landscape cloth" layer, and in fact your suspicion that it inhibits the compaction is correct. the compacted dg will tend to break up as it slips on the landscape cloth and be less stable than if it were just on a base course. i am an architect and have been working with landscape architects on decomposed granite paths, parking lots, patios, etc. for years. we have always had problems when the contractor insisted on using some kind of weed prevention cloth layer. the first thing you need to do is REMOVE the grass - don't just kill it. if you leave the dead grass, as it decomposes it will create voids that will cause settlement. the best way to install dg is to compact the base soil with a plate compactor, lay down about 4-6" of what is called aggregate base course or "road base" (assorted size gravel with some fines) and then compact that with the plate compactor, and finally the dg (about 3 inches thick) and compact that too. if the base is properly prepared and everything is compacted that way, it will be a rare and hardy weed that ever makes it's way through. make sure that the surface is crowned slightly or else slopes one way or the other. dg will absorb water, but it does so at a semi-slow rate, and you want to eliminate ponding. you don't really need any kind of stabilizer or binder unless you want to support vehicular traffic. if you do, i don't know that you can get it at lowes or home depot. we usually have it supplied by a company called Stabilizer Solutions (out of Arizona) but they pre-mix it into the material and truck it out to the jobsite (cross country if necessary). not really good for do-it-yourself kind of jobs...

Update. I was able to dig a few holes myself to about 6" and 24"+ wide and then I filled them with water and let them drain a few times. They drain within 3-10 hours. After a couple soaks, I was able to get one of these holes to 15", others to 10". Where I want to put dwarf Reed and Fuerte avocados I could only get 3" down. An asphalt driveway was here before which probably compacted things. I had a landscaper use a breaker hammer to dig large holes (~18" deep, ~36" D). Here's where my problem is. I filled these with 12" of water and two days later the water has only drained a couple inches. This surprised me because all other holes I've dug into the DG have drained well even though they seem like the same material. I'm thinking I should build up the ground and plant them above grade. I know avos have most of their roots within the top 6" and the area has a few inches of existing soil, plus a thin layer of leaves and then 3" of fine bark mulch I put down. The hard DG also softens over time with water and organic matter, right? Is this a good plan? I have broken concrete available for back fill. I think I should layer it with soil to eliminate air pockets instead of making a dry well which I don't think will drain. Lastly, is this a good idea or am I fighting a losing battle? I chose avocados because avos are evergreen, this is an ornamental part of my property and we love and eat them every day. However, I don't want to kill two expensive trees. One hole has the wheelbarrow over it. The other hole has some rubble in it (an attempt to raise the water level to possibly more porous soil. Proposed plan:

Thank you, ToxCrusadr! Your reminder of the fact that DG are solid, unchanged particles rather than the porous end product of expanded shale gave me my "DUH/I'm a moron" moment. Regarding expanded shale research: I enjoyed a brief (grant-sponsored, part-time) employment at the Tex A&M Urban Solutions Center in Dallas a few recent years ago. I was very fortunate to spend a brief time involved in soil sciences. However, my experience with this discipline was limited to soil fertility. Having said that, I feel that some of their non-fertility amendment based research (corporation funded grants) and subsequent results are often an effort in ridiculous predictability. My own extreme and annoyingly sarcastic example would be "would an ice cube retain its crystalline structure in an oven or a freezer". Therefore, I hope that the general gardener would not decide to attempt a successful garden using expanded shale alone. My understanding of the affects of various amendments to soil structure is limited to classroom lecture, persistent questions and personal experimentation. I am truly grateful for the chance to get advice from many varied angles.

It's used on some public trails where I live. DG can also be tracked in, but it's probably no worse than sand. I'm guessing, but I suspect the landscapers you talked to have only used DG for a walkway. You have to put down at least 1 & 1/2" for a walkway. Then it is watered in and tamped down, because a walkway needs to be compacted. However, let's say you cover dirt with half that much and it only gets rained on. Compaction will be minimized unless you or your dogs travel regular paths. Even then, it should be possible to till DG into the soil. One big caveat is what kind of soil do you have? Lighter soils that are mostly sand or silt won't be as affected, but clay soils tend to become hard and concrete-like when sand is added. Since DG is similar to sand it might do the same thing. Use this link to contact your local County Extension Office. Ask them what type of soil you have and if there could be negative effects to adding DG. If the office has no experience with adding DG to soil, they may not be able to give you a definitive answer, but they can probably tell you more about your soil in general. If you do find a landscaper who agrees to do this job the way you want, I recommend you write out a contract detailing EXACTLY what you expect. Things that aren't written down can become points of contention. Good luck.