I'm sitting at 1036 passive arpen and 194 hit rating unbuffed. The combat spreadsheet seems to think that it would be a DPS loss to make myself hitcapped (Buffed or not). Is this accurate or a fluke in the sheet?

Just to further elaborate off of what Pathal said: With 5/5 precision (I can't see your armory profile to see if you have 5/5, but I couldn't imagine you being a combat rogue and not have 5/5, and since you are going after armor pen, I would assume you to be a combat rogue) you only need 99 hit rating to be capped on specials (66 with a draenei). After that it just counts for spell hit, and armor pen is worth so much EP when you get to the level you have, I couldn't imagine that spell hit would be worth more.