You're correct. I neglected that; extension API compatibility is a big (the most important?) difference between PyPy and CPython's JIT. Amongst language features that affect optimisation potential, an extension API can be the worst.

Edit: I think what you're alluding to is that tracing JITs can overcome a lot of dynamic language features which make things hopeless for method JITs. Where LuaJIT really shines vs PyPy is outside of JITed loops. (Also memory and compile overheads). I realise this is a bit of a motte and bailey.