I tried this with a ASRock Creator x570 using onboard Thunderbolt and an RX 570 for the DP.
I also tried it with an HP G2 Thunderbolt dock, as well as Thunderbolt direct out of an HP Laptop.
I don't think any of those combos supported DSC.
If the idea is that the CAC-1085 ONLY works with DSC, that sounds like it would be problematic. My belief is it works both with and without DSC.
Forget about DSC, and even HDMI 2.1 for a second.
Just outputting a simple 1080P non DSC HDMI signal should be able to go from TB3 -> DP1.4 -> CAC-1085 -> HDMI input on HDTV and work. It didn't when I tested it.
I only bring this up because I had the expectations that someone could buy a 2020 iMac with an RX5700 or higher and use the TB3 to output 8K HDMI 2.1, and so far I don't see a way to do that.