Hi Dennis and thanks for the reply. It looks like I left out a few details. Long day/too late at night?!?
Do you have your color space in Capture NX set to ProPhoto Yes (I think that's an option)? Is that what you intend? Yes. I edit in NX in the ProPhoto space. When you first extract the JPEG from the NEF in PM, you say it looks OK? What does PM show for the profile at that point (e.g. ProPhoto (embedded) ProPhoto (determined by the info button in Finder for the appropriate image or just ProPhoto or maybe AdobeRGB)? Is the screen shot you posted with the extracted JPEG after you embedded the ProPhoto profile (apparently so)? Yes, and then changed in PM to embed the SRGB profile.
Why are you extracting the JPEG in PM when you could just save a JPEG from Capture (it would presumably be higher quality than the JPEG Nikon embeds into a NEF)? I thought it would be easier. Here's what I do. Go thru all the photos in a PM contact sheet, tag the ones for editing, view only the tagged and then edit in NX2, save, close and then ,after editing all, extract JPGs in PM, then change the embedded profile to SRGB. I might need to rethink my step by step process.
If you embed a profile then PM doesn't of course change the color space of the pixels. Therefore you only use this embed profile command when you know for sure that the pixels are in a given color space and you want to make it clear by embedding the profile explicitly within the JPEG. With Exif 2.21 you can clearly indicate sRGB or AdobeRGB color spaces without the need for an embedded profile, but if you really have ProPhoto pixels then a JPEG needs to have a ProPhoto profile. I'm wondering if the extracted JPEG is really in AdobeRGB. No. The extracted JPEG is in ProPHoto and then changed to SRGB via the tools menu. Try embedding AdobeRGB into the extracted JPEG and if it looks right then the pixels are really AdobeRGB.
Also, I have nothing against the ProPhoto color space, but because it has a larger gamut, the 8 bit precision of a JPEG photo in that color space means that you better be careful with subsequent editing or changing color spaces.
--dennis