Douglas
Although irrelevant to the point I was making, forget 3 dimensions. That is just a human conceptualisation of direction. In physical reality what exists is a definite number of possible directions from any given spatial position (ie all adjacent spatial positions which could be occupied if 'something' moves from its current position).
Space is the corollary of 'thing'. The same spatial positions deemed to be extrinsic space when considering one thing, can be intrinsic when considering another. In your balloon analogy, the "new space" is not new, because it did not "come from anywhere". The balloon (thing) altered dimension, ie the balloon got nearer to adjacent things-it occupied spatial positions which were previously, given the definition of the things involved, unoccupied. You are conceiving of space as if it is an entity in its own right, when all that physically exists are 'things'.
Now, expansion of the entirety of reality, as known to us, is a different matter. By definition, this is not detectable, except on an historical basis. Because it is an effect which is omnipresent, so there is no comparison possible to identify difference. In that sense then, whether this is occurring or not is irrelevant.
Forget about the "speed of light" and "inertial frames of reference". Whether the derivation was correct, or indeed the original observation was so, and irrespective of whether it actually happens or not, Lorentz postulated a physical alteration in dimension, in the line of travel. This, although on each occasion he put forward some simple explanation he also expressed reservations, was never rescinded and is the real variable in Relativity. The point being that for a law to be valid it must be possible to choose anything as the reference from which then to consider it. Note that any judgement inherently involves a reference. But, not only must one then continue to use that reference, but any change which occurs to it, or the other things being referenced, must be factored into the calculations. And they 'discovered' that matter alters dimension when differential force is applied, which also causes changing momentum. That is, the latter is an alternative indicator to the fact that dimension alteration is occurring.
An example. 2 buses. The momentum of one of them is altering. According to the theory, that indicates it is being subjected to a differential force (ie it is no longer in equilibrium/at rest) which causes an alteration in dimension. [Incidentally, there is a tendency to only talk of contraction/acceleration, but the concept was of a state of equilibrium size, ie that which it reverted to-which must involve 'expansion'-once forces regained a 'balance']. If this alteration in dimension is not taken into account, then space and timing will be incorrectly calculated. Because the 'squashed' bus would be considered as per the normal state one. But a squashed bus has further to travel as space (ie that which is 'not bus') to (say) the bus stop has increased, and it will take a longer timing, than would otherwise have been expected, to travel. That's it. No strange effects with 'time', or different observers, or light.
On Dark Matter/Energy, do not forget that light is just a physical phenomenon that organisms utilise in their sensory detection systems. There can be no presumption that it is capable of 'detecting' everything.
Paul