A couple of comments.
Clinical Facts:
All DKA is acute - there is no "chronic DKA"
High serum Na means the patient has total body water depletion. In this case, it's from the osmotic diuresis (sugar pulls out water).
Cerebral Pontine demylenation (CPM for some strange reason) is the result of correct HYPOnatremia too quickly. Your patient is hypernatremic so this is not relevant to your case.
Serum Na DROPS 1.6 points for every 100 points of glucose over 100 (add 16 to the serum glucose for a sugar of 1100). Serum Cl drops the same amount so the anion gap doesn't change. If your sugar is 500 and Na is 163, your corrected Na is 168.
You are right about the osmotic shift. The size of brain is based on where the water in the body is located (the cell is mostly water). If your serum glucose is 500, the water is trying to get into the blood stream. If your serum Na is high, the water is trying to get into the blood stream. The brain will swell as this is corrected (all the organs will but the brain is only one housed in cage called the skull).
Most really smart folks recommend getting the serum glucose down to somewhere between 200 and 300; I was taught to use 250. This is an attempt at fixing the underlying problems but trying to prevent brain swelling. It may be that this is just hooey but it's what everyone does.
I am guessing your resident is using some sort of DKA protocol. Form your description (obviously I wasn't there) she didn't explain the logic of treatment plan to you.
Not knowing the case, I'll try my best:
If a patient came in with just a serum Na of 163 (not in DKA) you would calculate the free water deficit and replace half in the first 24 hours. Usually these are patients who do not have access to water (s/p CVA, nursing home residents who can't do their own ADLs, infected, whatever). Occasionally you will see diabetes insipitus (you have to think of it) but it's usually not the cause.
In DKA the patient has an osmotic diuresis. The first stage is to turn off ketosis and then get the sugar under control (insulin does this). It also helps if you know what caused the DKA but that's another story.
Anyone who has working kidneys gets very volume depleted while in DKA - all osmotic diuresis. You're not supposed to bolus 1/2 normal saline (too low osms, it can cause hemolysis). The patient is dry. Most authorities recommend treating the volume depletion first and then the hyponatremia (give 6 to 8 liters of normal saline) then change to hypotonic fluids.
Asumming you have a 60 kilo male patient, the water deficit is about 7 liters so he needs about 3500 of free water in the 1st 24 hours of the admission. There are a lot of ways to fix this; I had one attending who would have given both NS and D5W in 2 different IVs (to each his own). Others would give NS for a certain amount (say 4 liters) and then change to hypotonic fluids.
Personally, I would have started 1/2 NS at 300cc/hr (assuming BP was stable and he got some NS bolused in the ER). Again, there are a lot of ways to do this.
Just make sure the lytes are monitored - he's going to need lots of K and P and probably some Mg as well.
Great case!