Sony's Steve Berkowitz cast some light on the repair work that had to be done for the SACD remixes, in an interview published on the website of ICE magazine in August 2003.  Regarding Blonde on Blonde, Berkowitz says,

 "Here you have a four-track [master] tape that was done in two different places; you have a tape that's in rough shape, the oxide is falling off. We had to go through all kinds of means to patch things, from mono tapes to an eight-track cartridge master from original LPs, because there are literally parts of the oxide that you can see right through the tape."

In other words, where there was a dropout in the tape, they searched around for the best available mono or stereo source which wasn't damaged at that point and used that to splice in the missing content. Splicing from a mono or stereo source into a five-channel surround mix would be much harder to do without the joins showing.

(Thanks to ICE editor Pete Howard for this.)