The thing I keep in mind is that the body does not know or care whether an androgen comes from the thyroid pathway or the adrenal pathway. DHEA remains DHEA to the body, regardless of its origin. So I'm with MrChibbs on this one. The question is why do the adrenals have to upregulate? A reasonable answer appears to be that body is trying to maintain hormonal balance in the face of declining thyroid function and elevated stress.
There must be a tipping point where the adrenal compensation can no longer make up for ever increasing stress leading to an adaptation to help spare energy production. Why does hair appear to be a prime target? Thats tough to answer. I think the circulatory system has to be involved.
The factors leading to the tipping point are hugely complex with multiple paths. Why do E levels rise in the first place? Hereditary factors, endotoxin, liver issues, physical stress, chemical stress, emotional stress, nutrient deprivation... endless list...
I'm not sure I can fully answer your question. But I'll think out loud. The rise in cortisol and estrogen promoted by exercise can easily be buffered by a young healthy person. In this scenario the exercise promotes an elevation in DHEA to buffer the stress promoting an androgenic body type.
The other factors above can and will still eventually weigh into the equation, at any time and potentially result in hairloss. There will always be a tipping point where PUFA will accumulate and tissue E levels rise reducing thyroids influence and extending beyond the adrenals ability to keep balance, it's just very difficult to predict the exact time in an individuals lifetime when this will occur.
I think there's good evidence that the rise in DHEA from the adrenals is adaptive - to protect from chronically elevated cortisol - , and yes at some point the part of the adrenals which makes DHEA seem to atrophy, which explains I think why elderly men tend to lose the extra body hair they accumulated throughout their adult years. Your perspective seems right, the body is trying to maintain homeostasis in the face of chronic stress, by pumping out DHEA to compensate.
Obviously we need to be more precise in terms of the evidence which backs all of this up. I read so much stuff that I get confused trying to assemble bits of evidence in a coherent way. For instance, why are adrenals inadequate at producing progesterone vs. DHEA? Ray mentioned this specifically, but I don't think there has been much research on this particular topic.
Scalp hair doesn't seem to suffer from being a target of androgens. More likely, humans have a tendency to lose scalp hair since it requires abundant peripheral blood flow and energy production. If you have the inherited tendencies and hormonal imprinting, for some it's relatively easy to get into a stress cascade, which causes loss of hair.
E levels rise with age, through aromatase. I'm sure Ray has written about this more eloquently.