Okay Brenton, at first I tried your second response to this thread and it did not work for me. If it does work then I still would like to find out how. But then I saw this post of yours linked below and gave it a try:
https://discussions.apple.com/thread/4338025?start=0&tstart=0
It works as you described! Big improvement with the handling of auto brightness on the iphone 5 in my opinion, though it still has one quirk, which I will elaborate on later.
My iphone 4 has had every IOS that was available since it came out, including ios 6 and it has worked the same on all of them. Set the brightness slider to what you like and with auto brightness on it would get brighter if you went into brighter conditions. This is where it stopped working though. If you went back into a darker environment it would NOT get dimmer. Only way to get it dimmer was to push a button to put the phone to sleep. Once awakened it went back to the original setting. With this system the slider NEVER moved. Thus if you turned the phone off when the phone was brighter you saw the phone get dimmer instantly.
The iphone 5 works differently. If you set it in your darkest environment, as brenton mentioned in the link above, and turn on auto dim the system does work. Go into a brighter room and you will not only see the phone get brighter, but you will actually see the slider move!! Go into an even brighter situation and it will do it again. Now go back to the darker room. You will NOW see the display get dimmer and the slider again will move to match the brightness! It moves down more slowly than it moves up which is good in my opinion as it does take time for the eyes to adjust to darker conditions. With the iphone 5 if you turn off auto brightness the slider will remain where it was when it was turned off. Turn it off in a bright environment and the slider will stay at the top of the scale, thus no noticeable difference in brightness when turning auto brightness off! Perhaps this is what is confusing for those of use that are used to the old way.
Works great in my opinion except for one thing, it now needs to be reset to the lowest conditions. Probably not something that many will have to do as I never turned off auto brightness in the two years I had my iphone 4. I don’t see why you shouldn't be able to set auto brightness at its highest setting and then have it go down when going to a darker room. Perhaps there is a reason, or perhats it is a quirk left over from the iphone 4… At least it works if one knows what to do.
Ken