I forgot to mention it's probably a good idea to grow your nails a bit on your picking hand. At minimum, they should be just beyond the top of your fingertips. I've grown all my nails on my hand as I'm a straight finger-pinker also.

Get a good nail file, the kind made with diamonds, not a cheap metal one or an emory board. It'll last you forever. I have one that's about 30 yrs old an old gf gave me. File your nails to the contour of your fingertips, and make sure you get the underside smooth, otherwise you'll be snagging strings. If you have thin nails, I think in the woman's section of a store that sells nail polish they sell stuff to make your nails stronger. Don't sweat it, I know a number of players that use the stuff, especially some classical players. Luckily, my nails are really thick, and I rarely split them.

I should have mentioned in the exercise you should keep running the riff over and over (slowly at first of course), and slowly ramp up the speed.

Now to make the exercise interesting. After about 4 cycles of the riff, with your fretting hand, finger the C at the 13th fret on the B string with your middle finger. Can you still pull-off on the high E? That's what Knopfler does in his solo. This will help finger independence on both hands. Now, just mess around with hybrid picking. E.g, get into a pentatonic box, put on a slow blues tune, and see what you come up with. Attack the strings you're plucking in different ways to get different dynamics in sound. Sometimes I'll "snap" a string really hard just for effect. I often sit around and just noodle around while watching tv or something. Sometimes I come up with something interesting (not often enough.)

Sooner or later, I'll get to your ring and pinky fingers. Or you can experiment on your own. I'm in an anesthesia hangover- had 2 out-patient procedures this week, and after the anesthesia high, I get major headaches. So I hope I've made some sense here.

I know you're into metal, and I'm kinda playing around with it myself. I don't think hybrid will help in shredding, but I've been experimenting with sweeps. I've found so far, it's kinda cool to do simple sweeps while using my fingers. Like ya said, it's always good to have as many tools in your arsenal as possible.

How's the circular picking going? Any improvement in speed?